12/07/22 15:29:00

ETFs: And now China too

Concerns about inflation, interest rates and recession have long been part of everyday life. Recently, however, the mood regarding China has turned around again, as the Corona figures are rising. On balance, inflows into equity ETFs still predominate.


12 July 2022. Frankfurt (Börse Frankfurt). Despite many concerns, ETFs are still in demand. Hubert Heuclin of BNP Paribas reports inflows into equity and bond ETFs, but not large ones. "The unexpectedly strong US labour market figures have provided brief relief, but fundamentally there are increasing signs of a recession," notes the trader. Given the significant slowdown in US growth, the market will probably remain difficult, selling waves included.

According to Heuclin, there are no clear favourites in equity ETFs at the moment: trading is spread across the USA, the Eurozone and global equities. For example, the iShares Core S&P 500 (IE00B5BMR087) and the iShares S&P 500 Swap (IE00BMTX1Y45) are doing well. In terms of the Eurozone, the iShares Euro Stoxx (DE000A0D8Q07), for example, is the bet. Only the Stoxx Europe 600 ETFs, which track the whole of Europe, are out - be it the Lyxor Core Stoxx Europe 600 (LU0908500753) or its counterpart from iShares (DE0002635307).

China's shares: First buying, then selling

According to Torben Bendt of Lang & Schwarz, China is currently a big topic. He reports high turnover in the Xtrackers MSCI China (LU0514695690). "Last week there was a lot of buying, this week - with the downward movement in the market - more selling." BNP Paribas clients* are mainly betting on the iShares MSCI China UCITS (IE00BJ5JPG56, IE00BQT3WG13). China's stock market has been on the rebound for several weeks. This week, however, it is heading down again in the face of rising Corona figures.

Chinese stocks top performers in June

As Morningstar reports, almost all of the fifteen best performing ETFs in June were products on the Chinese market. Topping the rankings was Global X China Electric Vehicle and Battery (IE00094FRAA6). It tracks Chinese companies from the electric vehicle and battery sectors.

Chinese tech stocks and the corresponding index funds also performed very well in June. Morningstar reports a "real swing in sentiment" after industry giants such as Alibaba and Baidu reported better-than-expected quarterly results. Investors are attracted by low valuations and the search for performance at a time of bear markets in the US and Europe. "The worst should be over for Chinese tech stocks," says Chelsey Tam, equity analyst at Morningstar. The results of the big internet giants could surprise on the upside as they are now less focused on growth and more on profitability, she adds.

Energy ETFs: up 44 per cent this year

Sector ETF trading continues to revolve around gas and oil products. Since Monday, no more Russian gas has been flowing through the Nord Stream 1 pipeline to Europe due to maintenance work. It is feared that gas deliveries will not be resumed.

Energy index funds are again recording high inflows, as Heuclin notes, for example with the iShares S&P 500 Energy Sector (IE00B42NKQ00). Although it has been weakening since mid-June, it is still up 44 per cent since the beginning of the year.

No interest in inflation protection

In the bond segment, according to Heuclin, government bonds are especially sought after, less so corporate bonds. For example, European government bonds end up in the portfolios with the Lyxor EuroMTS Highest Rated Macro-Weighted Govt Bond 3-5Y (LU1829219713), US Treasuries with the iShares USD Treasury Bond 3-7yr EUR Hedged (IE00BGPP6473) and German government bonds with the iShares eb.rexx Government Germany 2.5-5.5yr (DE0006289481). In the corporate bond segment, the SPDR Bloomberg 0-3 Year Euro Corporate Bond (IE00BC7GZW19) is very popular with investors.

Inflation-linked bonds no longer play a major role: Heuclin reports sales, for example of the iShares USD TIPS (IE00B1FZSC47).

Heuclin

ETCs: Focus on gas and gold

Lang & Schwarz continues to see a lot of turnover in commodity ETCs such as the WisdomTree Natural Gas 3x Daily Leveraged (IE00BLRPRG98), which reflects the gas price development with leverage 3. He also observes high turnover for gold ETCs, especially for Xetra-Gold (DE000A0S9GB0). The gold price had fallen recently, the troy ounce currently crosses the table at 1,735 US dollars. The all-time high in March was 2,069 US dollars.

Equites 
USABuys
Euro zoneBuys
ChinaBuys/Sells
  
Branches 
Oil and gasBuys
  
Bonds 
Treasury bondsBuys

from: Anna-Maria Borse, 12 July 2022, © Deutsche Börse AG

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