Taking profits after a strong first half and ahead of the reporting season? ETF investors do not necessarily seem to see it that way, with inflows continuing to dominate. Only in tech stocks do opinions differ.
11 July 2023. FRANKFURT (Börse Frankfurt). The turbulent previous week on the stock market was not reflected in ETF trading. Business is running on a quiet course. "The summer is making itself felt," explains Frank Mohr from Société Générale. "However, purchases clearly predominated last week." However, he adds that this is mainly due to the savings plans executed at the beginning of the month. At Lang & Schwarz, both sides are traded equally. "The focus is on S&P 500 and Nasdaq ETFs," notes trader Leo Puschmann. The DAX, which had marked a new all-time high of nearly 16,428 points as recently as mid-June, had fallen as low as 15,500 points last week on interest rate hike concerns. By midday on Tuesday, it was back up to 15,700 points.
Global indexes popular for savings plans - led by the MSCI World - account for the largest share of turnover at Société Générale, at 40 percent, with a significant buyer overhang (IE00B4L5Y983, <LU1861134382>). As for U.S. stocks, the picture is more mixed. "There's actually a tendency to be bearish," notes Mohr, referring to the Amundi S&P 500 (LU1681048804) and the iShares Nasdaq 100 (IE00B53SZB19). Mohr also sees inflows as well as outflows for the European indices with a slight seller overhang, only for German mostly inflows.
The Nasdaq 100 had gained almost 39 percent in the first half of the year - the best first half in its history. Since then, the trend has been sideways or slightly downward.
Tech sector: profit-taking ahead of reporting season as well
Technology stocks continue to attract a lot of attention in sector ETF trading. "This is the most exciting theme," Puschmann says. "We're seeing profit-taking, but we're also still seeing buying." This week, the second-quarter reporting season kicks off. Then it should become clear whether the price increase was justified.
At Société Générale, too, most of the action revolves around tech stocks, with energy and healthcare stocks alongside. "For all three, we tend to see declines," Mohr notes. The iShares Automation & Robotics (IE00BYZK4552) and the Xtrackers MSCI World Communication Services (IE00BM67HR47) are affected, for example. The former is still up 22 percent year-to-date, while the latter is up 26 percent.
In addition, investors* are divesting from the Amundi Stoxx Europe 600 Energy ESG Screened (LU1834988278), but are betting on the iShares S&P 500 Energy Sector (IE00B42NKQ00). Outflows dominate iShares Healthcare Innovation (IE00BYZK4776), which tracks global healthcare stocks.
Kommer ETF scores well
Incidentally, Mohr is registering good sales for the ETF launched three weeks ago by "ETF Pope" Gerd Kommer, known for bestsellers such as "Sovereign Investing with Index Funds and ETFs" and now present in many media. The L&G Gerd Kommer Multifactor Equity (IE000FPWSL69, (IE0001UQQ933) tracks equities from developed and emerging markets, with country weightings of 50 percent by market capitalization and 50 percent by GDP, so as not to focus too heavily on the United States. It also takes a multifactor approach.
Money market ETFs popular
At the same time, interest in money market and near-money market ETFs remains high. Mohr continues to see a lot of interest in the Lyxor Euro Overnight Return (FR0010510800). Meanwhile, investors no longer want to know much about corporate bonds: Amundi Index Euro Corporate SRI (LU1437018168) is on the sell lists, as is iShares USD Corp Bond ESG (IE00BKKKWJ26).
European-listed ETFs saw net inflows of $11.4 billion in June, led by fixed income inflows of nearly $7.9 billion, according to ETF issuer SPDR. Equity ETFs, on the other hand, saw "only" $6.1 billion in inflows, while commodity exposures lost more than $2.7 billion. "The fact that there were more inflows into bond ETFs than equity ETFs in June reflects investor uncertainty," said Markus Weis, head of ETF Germany at SPDR. Many investors expected interest rates to continue to rise and accordingly assumed a weakening equity market development. Among other things, SPDR reports purchases for more defensive equity strategies with dividend and value approach. In addition, some investors used the good prices of technology stocks to take profits and invested in smaller companies, for example, he said. "In bonds, the safety aspect also predominated. Investors preferred government bonds and safer corporate bonds."
Gold price tracker in demand
A lot of money at Lang & Schwarz is also going into gold ETCs, especially Xetra Gold (DE000A0S9GB0). "There are signs of stabilization in the gold price," notes Puschmann. The gold price had fallen from US$2,059 at the beginning of May to around US$1,900; now it is back to US$1,936. It has become quieter around the gas ETCs with leverage (IE00BLRPRG98), which have long been so popular.
Trading in crypto ETNs is also more leisurely. In that, bitcoin had briefly risen above $31,000 last week, but is now at $30,508. "We don't notice that," reports Puschmann.
Equities |
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World | Purchases |
USA | Sales |
Europe | Purchases |
Germany | Purchases |
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Industries |
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Technology | Sales/Purchases |
Energy | Sales |
Health | Sales |
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Bonds | |
Money market | Purchases |
Corporate Bonds | Sales |
by Anna-Maria Borse, 11 July 2023, © Deutsche Börse
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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