The steep rise in tech stocks continues, with some still getting in and some getting out. Broad U.S. equity ETFs are often on the down list, MSCI World trackers are doing better. Still popular: money market ETFs.
18 July, 2023 FRANKFURT (Frankfurt Stock Exchange). The continued strong rise of technology stocks is also directing the focus on the sector in ETF trading. Especially the very big ones, i.e. Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia and Tesla score with fabulous price gains. The U.S. tech index Nasdaq 100 is now up a whopping 45 percent since the start of the year. "It's a lot about tech, but also specifically AI stocks," notes Andreas Schröer of Lang & Schwarz. He sees mostly buying. However, other traders also report selling, probably profit-taking. Even apart from that, the picture in ETF trading is currently mixed: purchases and sales in equal measure, at best a small buying overhang.
In any case, the time of year is making itself felt. "Although the stock indices were able to record decent gains, turnover was behind that of the previous week," explains Holger Heinrich from Baader Bank. "There is not much going on, and compared to the previous week, it is again quieter," says also Frank Mohr from Société Générale.
AI ETF with price increase of 40 percent
"Significantly more buying" is seen by Schröer for WisdomTree Artificial Intelligence (IE00BDVPNG13), for example. The price had briefly dropped somewhat, now it is going up again. Since the beginning of the year, a plus of 40 percent is on the books. Nasdaq ETPs with leverage, such as the WisdomTree Nasdaq 100 3x Daily Leveraged (IE00BLRPRL42), are also doing really well again. Mohr, on the other hand, reports mainly sales of tech stocks - with high turnover. The Lyxor MSCI World Information Technology (LU0533033667) and the iShares Automation & Robotics (IE00BYZK4552) are affected.
USA Mixed picture, mostly buy
However, the highest turnover is in the market-wide trackers, currently mainly trackers of U.S. stocks, according to Mohr. "They account for 40 percent of our trading volume." Focus here: Sales, such as of S&P 500 trackers from BNP Paribas and Lyxor (FR0011550177, LU0496786574). According to Heinrich, sales of U.S. equity trackers are also concentrated in S&P 500 ETFs, often with ESG filters. He cites the iShares S&P 500 ESG (IE000R9FA4A0) and the UBS S&P 500 ESG hedged to Euro (IE00BHXMHQ65) as examples.
"We are seeing a lot of buying in MSCI World ETFs," Schröer also notes. Mohr also reports a clear buying overhang for global equities. MSCI World ETFs from iShares (IE00B4L5Y983) and Lyxor (FR0010315770), for example, are landing in portfolios. The still fairly new ETF from "ETF Pope" Gerd Kommer continues to do well, according to Heinrich. The L&G Gerd Kommer Multifactor Equity (IE000FPWSL69, (IE0001UQQ933) tracks developed and emerging market equities, with country weightings of 50 percent by market capitalization and 50 percent by GDP to avoid too much concentration on the United States. In addition, a multifactor approach is pursued.
"We are seeing a lot of buying in MSCI World ETFs," Schröer also notes. Mohr also reports a clear buying overhang for global equities. MSCI World ETFs from iShares (IE00B4L5Y983) and Lyxor (FR0010315770), for example, are landing in portfolios. The still fairly new ETF from "ETF Pope" Gerd Kommer continues to do well, according to Heinrich. The L&G Gerd Kommer Multifactor Equity (IE000FPWSL69, (IE0001UQQ933) tracks developed and emerging market equities, with country weightings of 50 percent by market capitalization and 50 percent by GDP to avoid too much concentration on the United States. In addition, a multifactor approach is followed.
Europe: mixed picture
"In Europe, Germany received somewhat more attention," Heinrich also reports. The Deka Germany 30 (<DE000ETFL516>) and the Xtrackers MDAX ESG Screened (IE00B9MRJJ36), for example, were bought. Broad indexes were also sought after, such as Vanguard FTSE Developed Europe ex UK (IE00BKX55S42) and Invesco Euro Stoxx 50 (IE00B60SWX25), he said. Société Générale is dominated by decliners, such as Xtrackers DAX (LU0274211480) and iShares Core DAX (DE0005933931).
According to Mohr, the Amundi S&P Global Energy Carbon Reduced (IE000J0LN0R5) is also popular. This offers access to large and medium-sized companies from the energy sector, and the shares are also filtered according to ESG criteria. This year, however, things are not going well for the ETF, which is down 5.5 percent year-to-date.
High demand for money market products
In the bond ETF business, the trend of previous weeks continues: high inflows into money market and near-money market products. On the buy list, according to Mohr, are Lyxor Euro Overnight Return (FR0010510800), Xtrackers II EUR Overnight Rate Swap (LU0290358497) and JPM USD Ultra-Short Income (IE00BDFC6Q91).
Inflows into bond ETFs were on a par with those into equity ETFs for the first time in the first half of the year, as reported by issuer Amundi. A total of 300 billion euros flowed into ETFs worldwide, half each into equity and bond products. "The pick-up in demand for bond ETFs can be attributed to good valuations after last year's corrections, higher yields and a broader bond ETF offering," Amundi explains. However, product diversity still remains greater in the equity space: on the Frankfurt Stock Exchange, 1,375 of the total 1,923 ETFs are equity ETFs and 517 are bond ETFs.
Crypto ETNs: Fuss around Ripple
Trading in crypto ETNs is busier again, as Schröer explains. "The court decision on Ripple has brought a real boost." A ruling favorable to Ripple - and running against the Securities and Exchange Commission's line - regarding its character as a security had caused the price of the Ripple cryptocurrency XRP to explode on Friday. The actual significance is still being debated. Many expect that the SEC will challenge the decision, overall it also brings little clarity, according to reports.
The price of Ripple ETNs also shot up, such as 21Shares Ripple XRP (CH0454664043), which climbed from 12.40 to more than 20 euros. Other crypto ETNs did not benefit, such as the large and high-turnover ETC Group Physical Bitcoin (DE000A27Z304).
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USA | Sales |
World | Purchases |
Europe/Germany | Purchases/Sales |
Industries | |
Technology | Purchases/Sales |
Bonds | |
Money market | Purchases |
Crypto-ETNs | |
Ripple | Purchases |
by: Anna-Maria Borse © 18 July 2023, Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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