10/01/23 15:25:57

ETFs: Lots of fresh money at the start of the year

Not only has the DAX made a strong start to the new year, but ETF trading is also off to a good start. Favorites are once again US and global equities - but this time also emerging market stocks.


10 January 2023. Frankfurt (Frankfurt Stock Exchange). The furious start to the year on the stock exchanges is lifting spirits - but that's not all: "As always at the beginning of the year, a lot of fresh money is coming into the market," reports Frank Mohr from Société Générale. He reports high ETF turnover and a clear buyer overhang for the first trading week in the new year. The focus is clearly on equity ETFs at the moment, he said. "They account for three-quarters of our turnover."

Heinrich Holger, who trades ETFs and funds at Baader Bank, has a similar view: "We had around 50 percent more purchases than sales in the first week - in line with the successful start to the year on the equity markets." In particular, classic index trackers were snapped up, also in the ESG variants, he says.

"Again more focus on USA and world than Europe"

New year, old trends: as in previous months, global and U.S. trackers are in particular demand in equity ETF trading. According to Mohr, shopping lists include the Lyxor MSCI North America (<LU0392494992>) and iShares Core S&P 500 (IE00B5BMR087), as well as MSCI World trackers from Lyxor (<LU0392494562>) and iShares (IE00B4L5Y983).

"There tended to be more ETFs focused on the U.S. and world traded than those focused on Europe," Heinrich also notes. Among the favorites were products such as the currency-hedged Lyxor Nasdaq 100 (<LU1954152853>), the Xtrackers S&P 500 Equal Weight with equal weighting of stocks (IE0002EI5AG0), also currency-hedged, and the iShares Stoxx Europe 50 (DE0005933949). ESG and SRI variants of the major indexes (IE00BDZZTM54, <LU2109786660>, IE000CR7DJI8) also continue to do well, according to Heinrich.

The iShares Core DAX (DE0005933931) was the most traded ETF on Xetra in 2022, generating turnover of 11.6 billion euros.

Emerging markets off to a good start this year

But the new year also brings news: "The high level of interest in emerging markets trackers such as the Lyxor MSCI Emerging Markets (<LU0635178014>) is striking," adds Mohr. These are in third place on the list of most popular regions, behind the U.S. and the world - and ahead of Europe. "Purchases clearly predominate here." Emerging markets ETFs disappointed in 2022, but this year they are moving up. The Lyxor ETF, for example, is already up more than 6 percent.

Turkey ETFs with a nose in front 

The online ETF advisor justETF has calculated which country ETFs performed best in 2022: Turkey comes in first place, with MSCI Turkey more than doubling (101.6 percent). It is followed - in each case measured by MSCI and FTSE trackers - by Brazil with 20 percent, Thailand with 11 percent, Indonesia with 9 percent and Mexico with 3 percent. Vietnam brings up the rear, with the index plunging 42 percent. ETFs with access to stocks from Sweden (down 26 percent), Taiwan and Pakistan (both down 25 percent) and South Korea (down 24 percent) also lost ground, read justetf.com.

Cashing in on healthcare stocks

The most heavily traded sectors also feature familiar themes with minor variations: According to Mohr, ETFs that track the healthcare, technology and financial sectors are seeing the most turnover. "Health care stocks (LU0533033238), which after all did well last year, are mostly selling now." For technology stocks, he reports buying (IE00BWBXM948) and selling (IE00BGL86Z12), and for financials (IE00BD3V0B10), selling. "In the process, many expect banks to benefit from higher interest rates in 2023."

Hydrogen sector poised for big jump?

As for thematic ETFs, Mohr sees inflows into VanEck Hydrogen Economy (IE00BMDH1538) and outflows from Lyxor MSCI Millennials ESG Filtered (LU2023678449). The latter provides access to companies from developed and emerging markets whose business model is geared towards the Millennial generation, filtered according to ESG criteria.

Also from Morningstar comes a list of the best and worst tracker products 2022, which include ETFs as well as ETCs and ETNs. The top performers here are also Turkey ETFs, plus energy ETFs and ETCs. At the bottom end are products focused on cryptocurrencies and digital assets, as well as cannabis and cloud computing. The worst performing product in 2022: the VanEck Crypto & Blockchain Innovators ETF (IE00BMDKNW35). It lost 84 percent.

Also from Morningstar comes a list of the best and worst tracker products 2022, which include ETFs as well as ETCs and ETNs. The top performers here are also Turkey ETFs, plus energy ETFs and ETCs. At the bottom end are products focused on cryptocurrencies and digital assets, as well as cannabis and cloud computing. The product with the worstprefer corporate bonds with SRI filters.

For bond ETFs, some expect high demand in view of the increased interest rates for the new year, but now it is still quiet: At Société Générale, European and U.S. corporate bonds are currently in particular demand, gladly also with SRI filter. For example, the Amundi Index Euro Corporate SRI (LU1437018168) and the Amundi Index US Corp SRI Hedged Euro (LU2297533809) are being bought. In contrast, inflows and outflows were balanced in the government bond business. "We see clear outflows in money market ETFs (FR0010510800)," explains Mohr. Performance 2022: the VanEck Crypto & Blockchain Innovators ETF (IE00BMDKNW35). It lost 84 percent.

by: Anna-Maria Borse, 10 January 2023, © Deutsche Börse AG

Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics. 

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