Even though the DAX turned positive today after a weak start: Uncertainty remains extremely high. ETF trading is dominated by sales. However, commodity and oil and gas ETFs are in demand - and also the long-weakening clean energy tracker.
8 March 2022. Frankfurt (Börse Frankfurt). Highly nervous stock markets, highly nervous investors - the Ukraine war continues to have a firm grip on ETF trading. The markets are very volatile. After the DAX fell to 12,535 points in the early morning, there were signs of stabilization at midday. The index is currently at 12,912 points.
A solution to the Ukraine conflict is not currently in sight, according to Jochen Stanzl of CMC Markets. However, bets on falling prices in shares and hedges against falling prices have climbed to a multi-year high, as the analyst explains. According to Stanzl, news of a ceasefire, for example, could therefore lead to massive uncovering by investors who had previously bet on falling prices.
Risk-takers bet on short and leveraged ETFs
Meanwhile, ETF traders report high turnover and many sales. In equities, investors are mostly focusing on large indices such as DAX, Euro Stoxx and MSCI World, as the Frankfurt Stock Exchange turnover list for the past five trading days shows.
A lot of turnover also goes into leveraged and reverse ETFs, such as the Xtrackers ShortDAX Daily Swap (LU0292106241) and the Xtrackers ShortDAX x2 Daily Swap (LU0411075020). Both have shown strong gains since the market began its sell-off. Fabian Wörndl of Lang & Schwarz reports high turnover in the WisdomTree Nasdaq 100 3x Daily Leveraged (IE00BLRPRL42) and the Xtrackers S&P 500 2x Inverse Daily Swap (LU0411078636).
Bank ETFs fly out of portfolios
Investors* no longer want to know much about bank ETFs. Before the start of the Ukraine war, these had made substantial gains in anticipation of rising interest rates. Now they are falling sharply: For example, the heavily traded iShares Euro Stoxx Banks 30-15 (DE0006289309) has lost almost a third of its value since mid-February. The situation is similar for the iShares Stoxx Europe 600 Banks (DE000A0F5UJ7), which is also a heavy trader. Banks are suffering from the much worse economic outlook and the less likely rapid rise in interest rates. Some institutions also have a lot of Russian business.
Commodity ETFs take off
On the winning side, however, are commodity and oil and gas ETFs. "We have a lot going on there," Wörndl notes. For example, the Market Access Jim Rogers International Commodity Index ETF (LU0249326488) is in extreme demand. Its price has risen by 40 percent since the beginning of the year. Also showing gains and high turnover is the iShares Stoxx Europe 600 Oil & Gas (DE000A0H08M3), which tracks shares of companies in the oil and gas sector.
The price of iShares Global Clean Energy (IE00B1XNHC34) has also risen sharply recently. The long-running, highly successful ETF, which had weakened since last November, is now benefiting from the expected sharp rise in demand for renewables due to the possible elimination of Russian oil and gas. However, it has by no means recovered its losses.
Russia no longer in MSCI Emerging Markets
A big topic on the ETF market at the moment is how to deal with Russian stocks and bonds in the major indexes, such as MSCI Emerging Markets. Index provider MSCI decided last Wednesday to exclude Russian stocks from emerging market indexes, and other index providers are taking a similar approach. Russia is currently uninvestable, MSCI's Dimitris Melas explained the move.
The share of Russian stocks in the MSCI Emerging Markets is not large: according to MSCI, it was 4 percent at the beginning of the year. In 2008, it was 10 percent. "At the beginning of the financial crisis, Russia was the fourth largest emerging market after China, South Korea and Brazil," MSCI explains. Today, China (32 percent), Taiwan (16 percent), India (12 percent), South Korea (12 percent) and Brazil (5 percent) dominate. MSCI Russia, with only Russian stocks, is to be eliminated completely. MSCI Russia ETFs are no longer traded on Xetra anyway.
ETFs tracking Russian equities were, unsurprisingly, among the index funds with the biggest losses in February, Morningstar reports: The iShares MSCI Russia ADR/GDR (<IE00B5V87390>) lost 73 percent. This tracker invests primarily in securities of Russian companies listed on foreign exchanges: via ADRs (American Depositary Receipts) on the New York Stock Exchange or Nasdaq, and GDRs (Global Depositary Receipts) and ADRs on the London Stock Exchange. As a reminder, the Moscow Stock Exchange has been closed since February 28.
Bond ETFs: Wait and see and park money
In bond ETF trading, money market products are currently in particular demand, as the turnover list shows: A lot of money is going into Lyxor Euro Overnight Return (FR0010510800), for example.
Shares | |
Germany | Sales |
Europe | Sales |
World | Salesäufe |
Leveraged and inverse | Buys |
Industries | |
Banks | Sales |
Commodities | Buys |
Oil and Gas | Buys |
Clean Energy | Buys |
by Anna-Maria Borse 8 March 2022, © Deutsche Börse AG