05/07/22 15:16:24

ETFs: Between energy worries and initial confidence

Investors remain cautious because market risks are not decreasing. They mainly buy ETFs with US equities.

5 July 2022 Frankfurt (Börse Frankfurt). In addition to ongoing recession concerns, fears of a complete lack of Russian gas supplies are also shaping ETF trading. A strike by Norwegian gas and oil workers is also weighing on sentiment. The DAX failed in an attempt to recover at the start of the week and on Tuesday remained below the 13,000 point mark. Within a week it fluctuates by more than 700 points. Nevertheless: "Overall, we see a little more selling than buying, but the situation seems to be calming down, there are individual position build-ups ", Frank Mohr of Société Générale reports on ETF trading.

"Although the news situation has not worsened dramatically, turnover is lower than usual," reports Jan Duisberg of ICF Bank, referring to the losses of the first half of the year on the stock market. For the DAX, for example, the weakest six months since the financial crisis in 2008 were recorded. It is noticeable that investors are trading a broader range of products.

"Overvaluation of US equities reduced".

According to Markus Reinwand of Helaba, investors are very negative about equities and have reduced their positions. Prices are still characterised by increased volatility. But: "The overvaluation of US stocks has been reduced, and euro stocks are increasingly attractively priced.

Equity ETFs: US favourites in portfolios

Somefocus on their favourite stocks and buy again: "Among the top 10 tracked indices underlyings, not a single one is on the sell side," Mohr points out. US stocks in particular are being bought. "In the short term, initial confidence seems to be returning here," explains Mohr. US stocks dominate the ETF business of Société Générale with a third of all turnover, while global stocks account for about a quarter of turnover. Buys predominate in S&P ETFs (<IE00B5BMR087, IE00BMTX1Y45, < IE00BFMXXD54>). NASDAQ trackers are on the buy lists alongside blue chips. In particular, the Lyxor Nasdaq-100 (< LU1829221024>) was added to the portfolio.

Frank Mohr


At ICF Bank, on the other hand, the DAX (DE000ETFL011) is in demand, according to Duisberg.

Sectors: energy, technology and health care in demand

Across sectors, the energy, technology and health care sectors in particular are shaping trading activity in Mohr's order book. After the profit-taking of the previous week, the energy sector experienced inflows. Mohr is registering purchases of the SPDR S&P US Energy Select Sector (IE00BWBXM492), the iShares Oil & Gas Exploration & Production (IE00B6R51Z18) and the Xtrackers MSCI World Energy (IE00BM67HM91), which is one of the big sector products.

At US$5.71, the price of gas has returned to the level seen at the end of March. At the beginning of June, however, it had still been 50 per cent above the current level. However, there is no single gas price. Prices fluctuate depending on where the natural gas is produced and where it is transported to. Germany is currently trying to buy more natural gas from Qatar and Norway to replace possible shortfalls in supplies from Russia. But this is not easy, because producing countries conclude contracts for several years and can only deliver what is not contractually guaranteed elsewhere.

Duisberg's clients are betting on falling oil prices and buy the WisdomTree Brent Crude Oil 3x Daily Short (IE00BLRPRK35), a triple-leveraged securitisation of the oil price. Alternative energy would be brought into the portfolio with L&G Hydrogen Economy (IE00BMYDM794), which tracks companies in the hydrogen sector.

Mohr also sees more buying than selling in technology stocks. The Xtrackers MSCI World Communication Services (IE00BM67HR47) and the First Trust NASDAQ Cybersecurity (IE00BF16M727) are in demand. In Duisberg, WisdomTree Cloud Computing (IE00BJGWQN72) is proving to be a sector favourite.

In terms of healthcare stocks, Société Générale is dominated by purchases of iShares Healthcare Innovation (IE00BYZK4776).

Cryptocurrencies: Out with it

"Cryptos are being sold massively," Duisberg reports. For example, the Crypto Basket Index ETP from 21Shares (CH0445689208) is on the sell lists, as is the Polkadot ETP (CH0593331561) from the same issuer. Bitcoin, as the world's oldest cryptocurrency, is currently hovering around the US$20,000 mark. It has lost a third of its value over the month alone. Rapidly rising interest rates in the US are seen as one of the main factors behind the crypto market sell-off.

Bonds: Inflation protection is in demand again

When it comes to fixed-income securities, clients of Société Générale focus on corporate bonds from Europe, such as the Amundi Index Euro Corporate SRI (LU1437018168). In addition, inflation-protected securities are coming back into the portfolios. Mohr sees demand for Lyxor Core Global Inflation-Linked 1-10 Years Bond (<LU1910939849>) and iShares € Inflation Linked Government Bond (IE00B0M62X26).

Jan Duisberg


Fixed Income 
Coroporate bonds EuropeBuys
Inflation-fixed bondsBuys

from: Antje Erhard, 5 July 2022, © Deutsche Börse AG

About the author

Antje Erhard is a journalist and moderator specialising in the stock market, business and finance.

Feedback and questions to redaktion@deutsche-boerse.com.


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