Index funds with stocks as well as bonds are mainly sold. The previous week's sought-after sectors have come under pressure - especially trackers of technology stocks. Financial stocks remain in demand.
15 February 2021. Frankfurt (Börse Frankfurt). After another volatile week, investors are trying to adjust their exposures to the new environment. "With uncertainty over Ukraine, inflation and interest rate hikes clouding the outlook, safety has many proponents," says Hubert Heuclin of BNP Paribas, summarizing the situation. As a result, more companies with stable earnings and low leverage are favored by an increasing number of strategists, he adds.
Frank Mohr of Société Générale reports a divided picture. "Institutional investors in particular are divesting equities and bonds." At the moment, he said, news is being traded, rather than the future as usual. "The questions will be how new entrants to the equity market will deal with such a market phase - unknown to them." The high volatility, he said, has seen turnover almost double year-on-year.
Hedging instead of panic
Jan Duisberg of ICF Bank has not seen any huge selling despite the market situation. "Many investors have hedged, but reactions to the news have been surprisingly moderate." So he remains cautiously optimistic: "Despite the worst start to the year in a long time, exacerbated by the Ukraine conflict, the upside advantage remains as long as the 15,000 level is not sustainably breached to the downside." Equity ETFs remain in demand among his clients*.
Duisberg
Equity ETFs: Global and EM
Mohr reports demand for broad-based portfolios, such as global with iShares Core MSCI World (IE00B4L5Y983), and emerging markets, such as in Lyxor MSCI Emerging Markets (<LU635178014>).
In European equity ETFs, buying and selling is balanced. Products that do not include armaments stocks would stand out: BNP Paribas Easy MSCI Europe ex Controversial Weapons (LU1291099718).
Mixed picture for US equity ETFs
Mohr's order books are dominated by sales of US equity ETFs (LU0490618542), but the situation is different at BNP Paribas. Here, the buy sides of the order books filled up after U.S. equity ETFs. Heuclin's top stock of the week is the iShares Edge MSCI USA Value Factor (IE00BD1F4M44), followed by the Invesco S&P 500 (IE00B3YCGJ38).
Fabian Wörndl of Lang & Schwarz confirmed the previous week's trend in his clients' investment behavior towards leveraged trackers of US indices. Wörndl registered particularly high turnover in the triple-leveraged ETNs WisdomTree S&P 500 3x Daily Leveraged (IE00B7Y34M31), WisdomTree NASDAQ 100 3X Daily Short (IE00BLRPRJ20) and in WisdomTree NASDAQ 100 3x Daily Leveraged (IE00BLRPRL42). "Here, investors are trading both ways."
Trading in Russian stock trackers
At the same time, there was plenty of activity in a Russian equities ETF, the iShares MSCI Russia ADR/GDR (<IE00B5V87390>), he said, although initial buying sentiment turned to selling as the week progressed.
Sectors: technology leading the selling
Technology stocks, the most sought-after stocks of the previous week, are now on the sell side. Mohr notes widespread selling in technology stocks, such as the iShares S&P 500 Information Technology Sector (IE00B3WJKG14). Also on the sell side is the energy sector, led by Xtrackers MSCI World Energy (IE00BM67HM91).
At both Mohr and Heuclin, ETFs with companies in the financial sector are the most heavily bought, with Lyxor STOXX Europe 600 Banks (LU1834983477) dominating the buy lists at both houses.
At Lang & Schwarz, buying is common in private equity ETFs, and only one has seen a turnaround in investor behavior. Wörndl has more sell orders on the books from iShares Listed Private Equity (IE00B1TXHL60).
Brent soon well above $100 a barrel?
Oil prices continue to rise due to the Ukraine crisis and low inventories: 100 U.S. dollars per barrel would easily be possible even without the Ukraine crisis, judges Michael Ott of Commerzbank: "However, this risk could push the oil price well above 100 U.S. dollars." The rise in oil prices to the highest level in seven years, close to the mark of 100 U.S. dollars for the North Sea variety Brent leads to strong turnover with the corresponding ETFs and ETCs, as Duisberg reports. "Demand has not slowed down at all here."
At Wörndl, business runs both ways - buying and selling. He is seeing particularly high turnover in a leveraged product from WisdomTree: WisdomTree WTI Crude Oil 2x Daily Leveraged (<DE000A2BDEB6>).
Mining stocks would be bought with a view to rising gold or precious metal prices: VanEck Vectors Gold Miners (IE00BQQP9F84) and VanEck Vectors Global Mining (IE00BDFBTQ78), Dusberg observes.
Themed ETFs: Crypto Renaissance.
Duisberg sees rising demand in crypto products, with his clients* favoring an Ethereum ETN from 21shares (CH0454664027) in this regard, as does Solana with the 21Shares Solana ETP (CH1114873776). "We've been seeing a bit of a renaissance here for the past two to three weeks."
Bond ETFs: selling dominates almost everywhere
Among bond trackers, sales of both government and corporate stocks dominate.
Mohr notes that European-originated products are selling off most, including the iShares Core Euro Corporate Bond (IE00B3F81R35) and the Amundi Government Bond Lowest Rated EuroMTS Investment Grade (LU1681046774), which focuses on lower-credit-quality companies. At the same time, there is a growing appetite for risk among some investors, as evidenced by purchases of high-yield corporate bonds in iShares Euro High Yield Corporate Bond (IE00B66F4759).
At Heuclin, European corporate stocks are also on the selling side: iShares Core EUR Corp Bond (<IE00BF11F565>), while U.S. corporate bonds with an ESG focus have certainly generated buying interest: SPDR Bloomberg SASB US Corporate ESG (IE00BLF7VX27). On the other hand, he was surprised by the selling pressure on Chinese corporate stocks. Investors are divesting from Goldman Sachs Access China Government Bond (IE00BJSBCS90) and iShares China CNY Bond (IE00BYPC1H27).
Shares | |
Emerging Markets | Buys |
World | Buys |
USA | Sales |
Europe | Buys and Sales |
Industries | |
Energy | Sales |
Finance | Buys |
Technology | Sales |
Fixed Income | |
US Government bonds | Sales |
Chin. Corporate Bonds | Sales |
Europ. Corporate Bonds | Sales |
Europ. Corporate Bonds High Yield | Buys |
by Antje Erhard
15 February 2022, © Deutsche Börse AG
Antje Erhard is a journalist and moderator specializing in the stock market, business and finance.
Feedback and questions to redaktion@deutsche-boerse.com