ETFs: "Emerging markets make a comeback"
For a long time, hardly anyone wanted to know anything about shares from emerging markets, including China. Now the wind has changed. On the other hand, some are now giving US equities the cold shoulder. Theme ETFs, such as those focusing on cyber security, remain popular.
24 January 2023. Frankfurt (Börse Frankfurt). Good mood, good turnover - the ETF business is buzzing. "There is a lot going on, turnover is clearly above average," reports Frank Mohr from Société Générale. Most of it is buying, he adds. "Most of it revolves around equity ETFs, which account for 80 percent of our turnover, much more than usual." Hubert Heuclin of BNP Paribas also reports a very strong start to the year in terms of turnover and high inflows, both in equity and bond ETFs.
At midday on Tuesday, the DAX stands at 15,068 points. This almost makes up for the slide below the 15,000 point mark last Thursday. Since the beginning of the year, the index is now up 7 percent.
Translated with www.DeepL.com/Translator (free version)
Less interest in US equities
MSCI World ETFs are seeing the highest turnover, according to traders. Heuclin reports a clear buyer overhang, with high inflows into the classic iShares MSCI World Core (IE00B4L5Y983) and the iShares MSCI ACWI (IE00B6R52259), which tracks both developed and emerging market equities. "We are seeing more outflows from the MSCI World ETFs (IE00B4L5Y983), albeit only slight," notes Mohr, on the other hand.
Even U.S. equities, which have long been so popular, are currently no longer in such high demand. Turnover is also high here, but inflows at Société Générale have shrunk, and outflows even dominate at BNP Paribas. BNP clients* are selling the iShares Core S&P 500 (IE00B5BMR087), for example. "The U.S. is likely to underperform the rest of the world, both in equities and bonds," notes Heuclin. "Markets may be underestimating how determined the Federal Reserve is to raise interest rates." A weaker U.S. dollar could also contribute to outflows of capital from the United States.
Mohr
Good start to the year for China's shares
What is striking is the renewed interest in emerging market stocks in general and Chinese stocks in particular. "Emerging markets were not an issue at all in the second half of 2022," explains Mohr. Now, for example, Lyxor MSCI Emerging Markets (<LU0635178014>) and iShares Core MSCI EM IMI (IE00BKM4GZ66) ended up in the portfolios.
At BNP Paribas, Chinese equities even rank second in inflows - just behind global equities. For example, the iShares MSCI China (IE00BJ5JPG56) is popular, as is the iShares MSCI China A (IE00BQT3WG13). The latter covers only A-shares, stocks traded in renminbi on the Shanghai and Shenzhen stock exchanges. Both ETFs have recently posted significant gains: The iShares MSCI China is up 14 percent since the beginning of the year, while the iShares MSCI China A is still up 9.4 percent.
Industries: Clear trend missing
In the sector ETF business, the picture is not so clear. According to Mohr, basic materials, technology and energy ETFs show particularly high turnover. "However, none of the sectors dominate, nor are the differences from purchases to sales large." He reports a balanced picture of inflows and outflows for the basic materials sector with gold producers (<LU0488317701>), and slight inflows for the technology sector, such as into iShares Automation & Robotics (IE00BYZK4552) and Invesco CoinShares Global Blockchain (IE00BGBN6P67). Heuclin reports strong inflows into bank ETFs such as the Invesco Stoxx Europe 600 Optimised Banks (IE00B5MTWD60).
Heuclin
Mohr said iShares Global Clean Energy (IE00B1XNHC34) is also heavily traded, with slight outflows currently. Buying outweighs buying in WisdomTree Cybersecurity (IE00BLPK3577) and L&G Hydrogen Economy (IE00BMYDM794), all thematic ETFs that focus on a specific trend across sectors. "These have been doing consistently well for some time," notes Mohr.
Bonds: Again, no to U.S. stocks
As far as bond ETFs are concerned, government bonds are in particular demand at BNP Paribas, again especially European ones. Investors are betting on the iShares Germany Govt Bond (IE00B5V94313), for example, but are parting with the Invesco US Treasury Bond 7-10 Year (IE00BF2FN646). Inflows also dominate the corporate bond space. Absolute favorite: the iShares Core EUR Corp Bond (IE00B3F81R35) with European corporate bonds. By contrast, inflation-linked ETFs (IE00B1FZSC47) are flying out of portfolios. Mohr also sees a lot of support for the iShares Core EUR Corp Bond, but also for the Amundi Index Euro Corporate SRI with sustainability filter (LU1437018168).
"Good ETF inflows despite challenging markets".
2022 was - despite the Ukraine war and the energy crisis - the fifth best in European ETF history in terms of flows, as ETF provider Amundi reports: 82 billion euros in new money flowed into European ETFs. On average over the last ten years, the European ETF market has thus grown by 17 percent per year. As far as equity ETFs were concerned, according to Amundi, global and U.S. exposures were particularly in demand over the year as a whole, while there were significant outflows from European equity ETFs. The issuer also reported high inflows for thematic ETFs, such as those focusing on renewable energies and cybersecurity. In the bond ETF space, government bonds and investment-grade corporate bonds were the most popular, it said. Emerging market bonds, on the other hand, saw significant outflows, particularly from Chinese bond ETFs, according to Amundi. ESG ETFs continued to be in strong demand, with high inflows.
| Equities | |
| World | Purchases and Sales |
| USA | Purchases and Sales |
| Emerging Markets | Purchases |
| China | Purchases |
| Industries | |
| Base material | Purchases and Sales |
| Technology | Purchases |
| Banks | Purchases |
| Themes | |
| Hydrogen | Purchases |
| Cyber Security | Purchases |
| Bonds | |
| Government Bonds Germany | Purchases |
| Corporate Bonds Europa | Purchases |
from: Anna-Maria Borse, 24 January 2023, © Deutsche Börse AG
About the author
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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Borse
Deutsche Börse 
