ETFs: "Profit-taking in tech stocks"

In generally unexciting trading, U.S. and global equities remain the favorites. Sustainability also remains in demand. China's shares, on the other hand, are unpopular. And tech stocks are being cashed out.

16 August 2022. Frankfurt (Börse Frankfurt). The stock markets are in summer rally mode. The DAX is heading for 14,000 points and stood at just under 13,900 points at midday on Tuesday. Yesterday, the Dow Jones even climbed to its highest level in almost three and a half months. However, this has not yet had an effect on the ETF business. "There is buying, but not on a large scale," reports Frank Mohr of Société Générale. "There is still little activity due to the vacations." Holger Heinrich of Baader Bank, meanwhile, reports some pickup in turnover in the major ETFs.

Still preferring U.S. and world equities

As for equity index funds, the trend toward U.S. and world equities continues, Mohr notes. "They account for over 60 percent of our sales." ETFs that track European equities, he said, only come in at about 10 percent - and are trending away. Mohr reports buying for the iShares Core MSCI World (IE00B4L5Y983), Lyxor MSCI USA ESG Leaders Extra (<LU1792117696>) and BNP Paribas Easy S&P 500 (FR0011550185), and selling for the Lyxor Stoxx Europe 600 (<LU0378434582>). Torben Bendt of Lang & Schwarz certainly sees interest in European equities, such as the iShares MSCI Europe SRI (IE00B52VJ196) and the iShares STOXX Europe 600 (DE0002635307). "There's a lot of buying going on there right now." Heinrich also says MSCI World ETFs are in demand right now. "In addition, low volatility and quality ETFs are doing well."

Sustainability remains an issue

As the examples show, ESG and SRI ETFs are now quite normal. Holger Heinrich also reports continued demand for such offerings. For example, he says, the L&G US Equity Responsible Exclusions (IE00BKLWY790) is well received, as are European ESG products. The L&G ETF provides access to U.S. companies that consider environmental, social and corporate governance factors. Heavyweights currently include tech giants Apple, Microsoft, Amazon, Tesla and Alphabet.

China stocks fly out of portfolios

Investors* are also saying goodbye to Chinese stocks, such as iShares MSCI China (IE00BQT3WG13) and Xtrackers MSCI China (LU0514695690), according to Bendt. "That's probably because of the bad news from China," Bendt surmises. It was announced yesterday (Monday) that the Chinese economy grew more slowly than expected in July. The central bank cut interest rates in response. The zero-covid policy with ever new lockdowns and travel bans continues to weigh on the economy.

Tech stocks: losses not yet recovered

The most closely followed sector is once again the technology sector. According to Mohr, levies currently predominate. "This is likely profit-taking." After all, the Nasdaq 100 has gained almost 24 percent since its low in June. Sellers include Xtrackers Future Mobility (IE00BGV5VR99) and iShares Digitalisation (IE00BYZK4883). The iShares Digitalisation has performed well recently, but is still down 15 percent year-to-date. It tracks companies that generate significant revenue from digitalization, from fintech services and contactless payments to online shopping and cybersecurity.

Energy stocks: up 56 percent

Mohr says shopping lists include energy stocks, such as the iShares S&P 500 Energy Sector (IE00B42NKQ00) and the SPDR S&P US Energy Select Sector (IE00BWBXM492). The sector is among the top performing sectors this year. The price of the iShares S&P 500 Energy Sector is up nearly 56 percent year-to-date, as is its SPDR counterpart.

Incidentally, the consumer discretionary sector, which received so much attention the previous week, hasn't played much of a role recently.

Bond trading without direction

Mohr cannot identify a clear direction in bond ETF trading. He reports sales for the Xtrackers II Eurozone Government Bond (LU0290355717) and purchases for the Amundi Index Euro Corporate SRI (LU1437018168) and the iShares EUR Inflation Linked Govt Bond (<ISIN: IE00B0M62X26>). "It's not a clear trend, though." As in the previous week, he is registering more activity in long-disinteresting money market ETFs, one example being Lyxor Euro Overnight Return (FR0010510800). However, recently, the losses outweighed the gains.