The expected U.S. interest rate turnaround has weighed on stock markets worldwide and depressed technology ETFs in particular. Meanwhile, setbacks are being used by to buy, especially global equity ETFs, as well as more specific energy, technology and financial trackers.
12 January 2021. Frankfurt (Börse Frankfurt). "Monetary policy has now become the focus of investor interest," says Hubert Heuclin of BNP Paribas, summarizing the market situation in light of announced interest rate hikes by the U.S. Federal Reserve.
Despite the interest rate issue, attention remains focused on equity ETFs with a global focus, with Heuclin seeing particularly high inflows into global products such as three different UBS ETF MSCI ACWI ETFs, hedged against the U.S. dollar, Swiss franc or euro. (<IE00BYM11J43>, <IE00BYM11L64>, <IE00BYM11K57>. In Europe, Heuclin's clients are asking for the entire region, tracked in the iShares Core MSCI Europe UCITS ETF (IE00B4K48X80)
Strong interest in equity ETFs
Frank Mohr, Société Générale, also reports continued buying demand: "The start of the year is cash flow time, we're seeing increased turnover in the first few weeks." Both institutional and retail investors* are active in the ETF market, he said, with significantly more buying than selling. "The money needs to continue to be invested despite rising interest rates." Mohr's order books are also dominated by the major standard indexes. He registers the most buys for iShares Core S&P 500 UCITS ETF (Acc) (IE00B5BMR087), Amundi Index MSCI World SRI (<LU1861134382>) and the emerging markets ETF Lyxor MSCI Emerging Markets ETF (<LU2200146228>).
Lang & Schwarz clients* are also primarily buying trackers of the major indexes. "Here, demand continues to be strong," reports Fabian Wörndl and suspects the use of apparently favorable entry prices in view of the setbacks behind it.
Caution only below 15,700 DAX points
In floor trading with ETFs, a similar picture: After a subdued start to the year, Jan Duisberg of ICF Bank is seeing good turnover in ETFs across all asset classes, a colorful mix with no clear direction "Recent price dips have spooked some market participants, but they could be the driver of upside surprises." Interest rate fears had already been rampant for two months, but they had not pulled the market down sustainably. Only below 15,700 points in the DAX would caution be required. "However, we do not see this level at the moment."
Duisberg
Sectors: Financials, tech and energy in demand
At BNP Paribas, ETFs with shares in the automotive sector stand out, with inflows into the iShares STOXX Europe 600 Automobiles & Parts ETF (DE000A0Q4R28), for example.
Financials are also in demand in the form of the iShares EURO STOXX Banks ETF (DE0006289309), as this sector is benefiting from interest rate fantasies in particular, he said. Lang & Schwarz reports similar with purchases of the WisdomTree EURO STOXX Banks 3x Daily Leveraged (IE00BLS09N40), a triple-leveraged ETN that tracks European bank stocks.
A matching picture is described by Société Générale, where financial, energy and technology stocks account for nearly 50 percent of sector ETF turnover, specifically the Lyxor STOXX Europe 600 Banks (LU1834983477) and iShares EURO STOXX Banks ETFs.
In tech, it's the iShares Digital Security UCITS ETF (IE00BG0J4C88), and of the energy stocks, VanEck Vectors Semiconductor UCITS ETF (IE00BMC38736), ETF (DE0006289309) and MSCI World Energy UCITS ETF 1C (IE00BM67HM91). Duisberg also sees VanEck's semiconductor ETF on the favorites list (IE00BMC38736).
Bet on oil price recovery
With oil and gas prices recovering, Wörndl is also seeing heavy turnover in the energy sector. "Every dip is being bought," he adds. Long buy lists feature iShares Oil & Gas Exploration & Production UCITS ETF (IE00B6R51Z18) and iShares S&P 500 Energy Sector UCITS ETF (IE00B42NKQ00). Natural gas is triple-leveraged into portfolios with ETFs such as WisdomTree Natural Gas 3x Daily Leveraged (IE00BLRPRG98), he added. Timber is also among the commodities in demand at Wörndl, he said, fueling the buy side in the iShares Global Timber & Forestry ETF (IE00B27YCF74).
Duisberg's clients are also taking advantage of the recovery in the energy sector to buy oil ETCs, of which both Brent and WTI products are in demand, such as via ICE BRENT CRUDE OIL ETC (DE000PS701L2) and WisdomTree WTI Crude Oil (<DE000A0KRJX4>).
Fixed income: long-dated government bonds instead of short-dated ones
Of U.S. government bonds are overall mainly long maturities sought, ETFs with short-dated titles are sold predominantly: BNP Paribas sees inflows mainly into the iShares USD Treasury Bond 7-10yr ETF (IE00BGPP6697) and iShares USD Treasury Bond 20+yr ETF (IE00BSKRJZ44), according to Heuclin. U.S. corporate bonds are also in demand, for example in the form of two iShares Corp Bond ETFs with U.S. dollar or euro bonds (IE0032895942, IE00B3F81R35), he says.
Mohr sees buying in the Amundi Government Bond Lowest Rated EuroMTS Investment Grade ETF (LU1681046774), while selling shorts such as in the iShares Euro Ultrashort Bond ETF (IE00BCRY6557).
Selling in cryptocurrencies: Double-digit weekly percentage losses
Cryptocurrencies are experiencing a mostly weak start to the year, with weekly losses of 10 percent for Bitcoins, 16 percent for Ethereum and around 20 percent for Solana, with coins and altcoins selling off broadly... However, with little trading activity, "Turnover in cryptocurrencies has slowed down at the beginning of the year, with a clear difference to the end of 2021," Wörndl summarizes. Ethereum ETNs in particular have been sold off, he says.
After bitcoin's slide below the key technical support of $40,000 for the first time since September last year, a recovery has begun at least for the oldest cryptocurrency. Duisberg is registering buying again in the bitcoin ETN from VanEck (DE000A28M8D0).
Shares | |
World | Buys |
USA | Buys |
Europe | Buys |
Industries | |
Automobile | Buys |
Sustainability | Buys |
Finance | Buys |
Energy | Buys |
Fixed Income | |
US government bonds, long-dated | Buys |
US government bonds, short-dated | Sales |
European government bonds | Buys |
Corporate bonds USA, EUR | Buys |
Cryptocurrency-ETNs | Sales |
by Antje Erhard 11 January 2022, © Deutsche Börse AG