ETFs: US equities knocked off the pedestal
For a long time, US equities were favorites on the ETF market. Now the inflows are shrinking, or there are even outflows. Emerging market equities are back on the radar screen. Also in focus: energy and tech stocks.
7 February 2023. Frankfurt (Börse Frankfurt). The recent setbacks on the stock market cannot affect ETF demand. "The positive trend in turnover continues," reports Hubert Heuclin of BNP Paribas. "There is a lot of buying going on." Frank Mohr of Société Générale also reports above-average turnover with a clear buyer overhang. Last Thursday, the DAX had climbed to its highest level in almost a year at 15,520 points. Since then, the index has weakened somewhat, standing at 15,363 points at midday on Tuesday.
In the ETF business, U.S. stocks are no longer the first choice, this is once again evident. Traders report only small inflows or even outflows for the long-popular stocks. "This refers not only to a single product, but to many," notes Mohr. Affected by outflows, for example, is the iShares Core S&P 500 (IE00B5BMR087), he says. MSCI World ETFs, such as iShares Core MSCI World (IE00B4L5Y983), remain popular. For European stocks, traders report buying.
"Market suffers from U.S. tech company numbers"
The U.S. is currently experiencing headwinds from two sides, according to Heuclin: "Strong labor market numbers are fueling doubts that U.S. monetary policy will be eased soon," the trader notes. "In addition, the market is suffering from the numbers of U.S. technology companies." Last week, Apple, Alphabet and Amazon had presented their quarterly figures and disappointed for the most part.
It is precisely these quarterly figures that are also leading to high turnover in leveraged Nasdaq ETNs (IE00BLRPRL42, IE00BLRPRJ20), as Andreas Schröer of Lang & Schwarz explains. "We saw a lot there, long and short, especially buying." Leveraged S&P 500 ETNs (<E00B7Y34M31>, IE00B8K7KM88) have also been bought a lot, he said.
Emerging Markets Tracker? Yes, gladly!
The prominence of emerging markets ETFs at BNP is striking - buys across the board. Investors are betting big on the iShares Core MSCI EM IMI (IE00BKM4GZ66), UBS MSCI Emerging Markets Socially Responsible (LU1048313891) and similar emerging market trackers. Emerging markets are also a theme among Société Générale's clients. "We see the interest, but it is not yet reflected in our numbers," notes Mohr.
"An underlying positive market sentiment, complemented by the view that established developed markets are starting to run hot, is often the trigger for increased interest in emerging market assets," explains Martin Lück, head of capital markets strategy at BlackRock. Compared to the "taper tantrum" of 2013, when emerging markets fell dramatically due to rising U.S. interest rates, many emerging markets are fundamentally better off today, he says. Among other things, Lück points to lower foreign debt and more balanced current accounts. However, he warns against undifferentiated optimism, saying that not all emerging markets are the same. "'Positive, but selective' is therefore more the motto."
Mohr
Energy price rise gone too far?
With a lot of movement in individual sectors, there is also a lot going on in sector ETF trading. In focus: the energy and technology sectors. After the gas price collapse, investors are apparently losing confidence in energy ETFs or taking profits. Mohr sees these on the down lists, such as the SPDR S&P U.S. Energy Select Sector (IE00BWBXM492) and the Invesco Morningstar US Energy Infrastructure (IE00B94ZB998). Heuclin has even seen large outflows, such as from Xtrackers MSCI World Energy (IE00BM67HM91). Turnover in gas ETCs (<IE00BLRPRG98>, <IE00B76BRD76>), on the other hand, has declined somewhat, according to Lang & Schwarz trader Schröer.
Tech sector: Entry despite disappointing figures
Very much attention is also technology ETFs because of the quarterly figures. Here, however, purchases predominate. At Société Générale, investors are betting a lot on the iShares S&P 500 Information Technology (IE00B3WJKG14). Schröer reports a lot of turnover on the buy side for the Xtrackers MSCI World Information Technology (IE00BM67HT60).
Mohr, however, sees the highest turnover in health care stocks, mostly selling. For BNP clients, European consumer (IE00BMW42074) and bank (LU1829219390) ETFs top the shopping list. In the business of thematic ETFs, which focus on one theme across sectors, the main themes continue to be hydrogen (IE00BMYDM794, IE00BMDH1538) and renewable energy, according to Mohr.
Bunds reviled
In the bond ETF business, corporate bonds in particular are doing well, as Heuclin explains, from Europe (IE00B4L60045) or the United States. "There are also longer maturities again." However, a favorite of Société Générale clients is the iShares USD Short Duration Corp Bond with short-dated corporate bonds (IE00BCRY5Y77).
Heuclin registers the highest inflows into government bonds for European paper, for example the Xtrackers II iBoxx Eurozone Government Bond Yield Plus 1-3 (LU0925589839). German government bonds, on the other hand, would be sold (IE00B5V94313). Mohr also sees buying in short-dated European government bonds (IE00B3FH7618).
Also sought after by Société Générale clients*: Lyxor US Curve Steepening 2-10 (LU2018762653). The tracks a strategy based on changes in the U.S. yield curve. If the slope of the curve increases by 1 basis point, the index is expected to rise by about 7 basis points.
| Equities | |
| World | Purchases |
| USA | Sales, Purchases |
| Europe | Purchases |
| Schwellenländer | Purchases |
| Industries | |
| Energy | Sales |
| Technology | Purchases |
| Health | Sales |
| Themes | |
| Hydrogen | Purchases |
| Bonds | |
| German government bonds | Purchases |
by Anna-Maria Borse, 7 February 2023, © Deutsche Börse AG
About the Author
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
Feedback and questions to redaktion@deutsche-boerse.com
Borse
Deutsche Börse 
