Unlike the previous week, emerging markets are no longer the big topic - most of the focus is on global and US equities. ETFs with sustainability filters have long since established themselves. Increasingly important: thematic ETFs, such as clean energy index funds.
31 January 2023. Frankfurt (Börse Frankfurt). ETF trading continues to be busy. "Turnover was good throughout January, with brisk demand from all directions," reports Frank Mohr from Société Générale. Both retail and institutional investors, including insurance companies, were betting on ETFs. "Buying also predominated last week." Hubert Heuclin of BNP Paribas also reports continued high inflows into equity and bond ETFs.
Holger Heinrich of Baader Bank is somewhat more cautious: "Although the equity markets, especially the U.S., have performed well to very well in the past week, this has not been reflected in our turnovers." The DAX has been moving sideways since the strong gains in the first half of January, with the index standing at 15,050 points at midday on Tuesday.
Emerging markets stocks no longer in such high demand
Turnover racers are once again trackers for U.S. and global equities. "Buying clearly predominates," explains Mohr, referring to the iShares classic on the MSCI World (IE00B4L5Y983) and the S&P tracker from Invesco (IE00B3XXRP09). Heinrich also observed interest in factor ETFs: "Among U.S. ETFs, minimum volatility (IE00B6SPMN59) and value (IE00BX7RR706) ETFs were in demand alongside the usual index products." BNP Paribas clients* also continue to focus primarily on global equities, for example with the iShares Core MSCI World (IE00B4L5Y983). US equities, however, are dominated by outflows - as in the previous week (LU1681048804).
Smaller inflows are reported by BNP and Société Générale for European equities. "German equities are being sold, however," adds Mohr. Heinrich sees interest in the mid- and small-cap sector, such as iShares Euro Stoxx Mid (IE00B02KXL92) and Deka MDAX (DE000ETFL441).
Rather unusually, Japan appears in Société Générale's top ten list of countries with the highest turnover. "You rarely see that," notes Mohr. Turnover in emerging market equities has roughly tailed off, he says. "They're still present, though." The top-selling iShares Core MSCI EM IMI (IE00BKM4GZ66) has lost some ground recently, but is still up 7 percent year-to-date.
"Sustainable ETFs - a quarter of sales"
ETFs with a sustainability focus continue to be in demand. "They account for about 25 percent of our sales," Mohr estimates. Currently in demand: the iShares MSCI World ESG Screened (IE00BFNM3J75) and the Lyxor 1 DAX 50 ESG (DE000ETF9090). Heinrich confirms the trend, saying the focus is on European ESG stocks, such as with BNP Paribas Easy MSCI Europe Small Caps SRI S-Series PAB 5% Capped (LU1291101555). Heuclin reports strong inflows into the JPMorgan Carbon Transition Global Equity CTB (IE00BMDWYZ92).
ETFs with the name suffix PAB and CTB are aligned with the EU's Paris Aligned and Climate Transition benchmarks, which were created in 2019. With these, the EU aims to provide a reliable benchmark and make green washing more difficult. Companies included in PAB indices must have at least 50 percent less CO2 intensity in year one compared to the standard indices, while those included in CTB must still have 30 percent. In addition, companies in PAB and CTB must reduce their greenhouse gases by an average of 7 percent year on year.
Mohr
ETFs with the name suffix PAB and CTB are based on the EU climate benchmarks "Paris Aligned" and "Climate Transition" created in 2019. With these, the EU aims to provide a reliable benchmark and make green washing more difficult. Companies included in PAB indices must have at least 50 percent less CO2 intensity in year one compared to the standard indices, while those included in CTB must still have 30 percent. In addition, companies in PAB and CTB must reduce their greenhouse gases by an average of 7 percent year on year.
Many fans: clean energy and hydrogen ETFs
In sector ETF trading, Mohr says healthcare, energy and technology stocks are currently leading the way in terms of turnover, with more selling in the former and buying in the latter. Heuclin is seeing buying in semiconductor and mining companies, specifically the iShares MSCI Global Semiconductors (IE000I8KRLL9) and VanEck Global Mining (IE00BDFBTQ78).
Thematic ETFs, which focus on a single theme across all sectors, continue to focus primarily on renewable energy and hydrogen, according to Mohr. Once again, the €5.5 billion iShares Global Clean Energy (IE00B1XNHC34) is showing strong sales, but this time with a bit more ceding. ETFs tracking the hydrogen sector, on the other hand, would be bought, such as those from L&G and VanEck (IE00BMYDM794, IE00BMDH1538).
Themed ETFs saw $5.5 billion in inflows in 2022, according to themed ETF provider RizeETF. Five themes dominated, together accounting for more than three-quarters of inflows: Clean Energy, Infrastructure, Cybersecurity, Food/Agriculture and Gender Equality. Robotics & AI, Healthcare Innovation, Internet & E-Commerce, Cloud Computing and Ageing Population saw the highest outflows - totaling $1.8 billion.
Corporates in particular sought after
As for bond ETFs, mixed global bonds and European corporate bonds with SRI filters are currently doing well (LU1437018168), Mohr reports. At BNP Paribas, corporate bonds are most sought after - with no clear regional preferences (IE00B3F81R35). U.S. stocks (<IE00BJ5JMP33>) are also avoided in government bonds, as in equities, Heuclin registered. European (IE00B1FZS913) and emerging market government bonds (IE00B5M4WH52), on the other hand, would continue to be bought.
Equities | |
World | Purchases |
USA | Purchases and Sales |
Europe | Purchases |
Industries | |
Health | Sales |
Semiconductor | Purchases |
Gold producers | Purchases |
Themes | |
Clean Energy | Purchases and Sales |
Hydrogen | Purchases |
Bonds | |
Corporate Bonds Europa | Purchases |
von: Anna-Maria Borse, 31 January 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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