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Eurozone growth less than expected in third-quarter
January 11. 2012--The European Union revised downwards on Wednesday its figure for eurozone growth over the third quarter of last year, to 0.1 percent.
The previous figure given was 0.2 percent and detailed EU data showed that a drop on France's previously published growth rate between July and September, from 0.4 percent to 0.3 percent, impacted the revision in gross domestic product (GDP).
Economists are watching closely to see if the first estimate for the all-important final three months of 2011 shows the eurozone -- home to some 330 million people across Europe -- dipping into recessionary waters.
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Source: EUbusiness
DB - Equity Research - Global Research-2011 ETF Market Review & 2012 Outlook : Expansion past market turbulence & regulatory challenges
January 11, 2012--ETF assets registered total growth of 3.2% over 2011. Comparing this to prior year growth rates, often over 30%, could provide an unfavorable picture and be perceived as a slowing down of the industry. However, this observation on the surface masks the fall in asset prices over the year, which contributed a decline of 9.3% to global ETF assets.
In fact, 2011 was the strongest year on record for the global ETF industry, however, growth strength varied in different geographical regions. Factors such as the economic environment, increased pressure on money managers to generate positive performance, regulatory scrutiny and industry competitive dynamics were just a few of the forces that contributed towards different fortunes among the world’s ETF geographical regions.
On a global level, ETFs exhibited strength on a number of fronts in 2011:
Increased Usage: ETFs became more widely used over 2011. This is captured by two key market metrics: The percentage of ETF flows when compared to mutual fund flows [ETF adoption rate] and the percentage of ETF turnover as compared to that of cash equities in general.
ETFs are now almost a third [29.6%] of the cash equities turnover in the US [up from 24.0% in December 2010], while that number for Europe registered at 8.7% [up from 6.9% over December 2010].
Furthermore, ETFs continue to advance against mutual funds, registering at 9.0% of mutual funds assets in the US and 2.8% in Europe, up from 8.4% and 2.7% last year respectively. Perhaps most impressive is the comparison of new money that listed [ETFs] and unlisted [mutual] funds have received over 2011. US ETFs received 2.8x higher flows than the ten-fold larger mutual fund industry. European ETFs received 2.2x higher flows than the thirty-plus-fold larger UCITS mutual fund industry. The numbers in Europe point to the conclusion that the weakness in the local ETF market is not specific to ETFs but more likely due to uncertain market conditions.
New money: The global ETF industry registered the strongest absolute cash inflows since its creation, totaling $163.8 billion during 2011. This was a marginal improvement [+0.5%] from the $163.0 billion that the industry gathered in 2010, when its assets grew by 26.2%. 2011 inflows demonstrate the ETF industry’s ability to continue attracting investors amid choppy market conditions.
New Products: The highest number of new ETFs launched in a single year was also registered in 2011, totaling 549. All asset classes exhibited strength, including equity with a total of 358 new launches, but two new characteristics distinctly marked the new ETF launch calendar in 2011:
Fixed income ETFs saw 116 new launches over the year, up from 96 last year. This asset class showed particular new asset gathering strength in the US [$48.0 billion] but the European new ETF launch calendar demonstrated strength with novel products such as short exposure to sovereign indices.
ETFs with benchmarks that track non-capitalization weighted indices, such as factor based, volatility-related, and equally weighted indices are a new niche that became stronger this year. This was a trend that provided an entry point for a few smaller ETF providers over 2011. As market conditions became more challenging, extracting positive returns has created demand for these more novel investment solutions.
The vast majority of ETF [97% at a global level] assets are invested in ETFs that track pure diversified beta indices. While ETFs remain a largely beta focused industry, launches this year are pointing towards more novel products that are creating tools that attempt to more efficiently extract alpha in a risk controlled manner. This wave of launches is testing the waters for a new dimension in the indexing and asset management industries in general.
ETF industry growth was relatively stronger outside the US and Europe. All regions demonstrated positive growth rates ranging from 5%-8%, with the exception of European ETF assets that shrunk close to 5%. Asia and other countries outside the US and Europe – especially Asia, Canada and South Africa – demonstrated healthy growth rates indicating that adoption rates are beginning to re-kindle after a more quiet 2010.
Asia saw a record number of new entrants [20] launching a collective 22 new ETFs into the region. It also saw cash flows in 2011 [$19.9 billion] that were twice those of 2010 [$10.8 billion]. This uptick signals increased interest through an increased number of new providers dipping their toes into the ETF market. It also tells a story of local larger providers making advances and getting more flows than US and European domiciled ETF providers over 2011. In other regions, there was large cross-listing activity by established, primarily US domiciled, providers, recognizing potential in regions outside the US, Asia and Europe.
Europe was the worst performing region with total inflows over 2011 totaling $22.1 billion, less than half of those registered in the prior year [$45.0 billion]. The slowdown in Europe is mostly due to negative price declines which kept investors at bay. In addition, the European market was also impacted – especially in the second half of the year - by uncertainty driven by credit and Euro stability concerns in the region and also, to a smaller extent, by negative regulator comments about ETFs.
Much of Europe’s ETF market fortune in the coming year will depend on what happens outside the ETF market over 2011
The resolution, or at least softening, of the Euro Sovereign crisis, and the impact it will have on market mood will be crucial. However, other forces are beginning to shift in Europe as well. At the moment, the European market is dominated by US asset managers and European investment banks. The large European asset management houses remain largely absent from the ETF market. Changing competitive dynamics on how mutual funds are sold across the European market are creating more incentives for European asset managers to engage in the ETF industry. Increased scrutiny by regulators in Europe also signals the belief that more retail and smaller investors are beginning to embrace the ETF product.
We expect ETFs to continue growing by 15%-20%over 2012 and while much of the growth will be determined by general market mood, ETFs are at a stage where they are exhibiting signs of functioning as an independent - portfolio building - market. In the US market, fixed income ETFs over 2011 have reflected broader economic risk themes, proving that ETFs grow not only when the equity market is rising. Gold ETPs also played an important role in filling the risk off trade both in the US and Europe. A balancing of asset class sizes in the ETP industry can also help growth prospects going forward.
Some of the factors that have kept the European market relatively subdued this year, especially on the ETF front, seem to be heading for a resolution. The European Securities and Markets Authority [ESMA] is poised to publish additional guidance on ETFs in the first quarter of 2012, signaling the beginning of closing the loop on the European ETF industry’s biggest test since its creation. The uptick of cash flows in Asia and other parts of the word indicate that the ETF functionality benefits are enticing investors in those regions as well.
But the industry is at a turning point in its evolution. Growth is normalizing and ETFs are about to go mainstream with retail investors in Europe. Failure to proceed with a swift resolution in the regulatory investigations could negatively impact ETF growth in 2012. Additionally, prolonged uncertainty in the equity markets, both in the US and Europe, could slow down allocations in the industry’s larger compartment, equity. Gold ETPs, a major beneficiary of the credit crisis accounting for 8.1% of the global ETP industry, could see big outflows if the outlook for the price of gold changes. Much of the investment in gold ETPs is concentrated in a handful of products in the US and Europe.
These are all factors to watch out for in the first quarter of 2012. We don’t believe they pose a vital threat to the general health of the industry; they could however generate shocks which could drag ETFs to reflect conditions prevalent in the rest of the wider – confidence stricken –market and thus push growth in the slower lane.
To request a copy of the report
Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
EURO AREA SECURITIES ISSUES STATISTICS: NOVEMBER 2011
January 11, 2012--The annual growth rate of the outstanding amount of debt securities issued by euro area residents decreased from 3.4% in October 2011 to 2.5% in November. For the outstanding amount of quoted shares issued by euro area residents, the annual growth rate was 1.5% in November 2011, compared with 1.7% in October.
New issuance of debt securities by euro area residents totalled EUR 1,121 billion in November 2011.
Redemptions stood at EUR 1,025 billion and net issues amounted to EUR 96 billion.1 The annual growth
rate of outstanding debt securities issued by euro area residents decreased from 3.4% in October 2011
to 2.5% in November (see Table 1 and Charts 1 and 3).
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Source: ECB
Lyxor Asset Management Starts Four More Commodity Exchange Funds
January 11, 2012--Lyxor Asset Management started four commodity exchange-traded funds tied to returns of the Standard & Poor’s GSCI Index of 24 raw materials.
The funds on the London Stock Exchange will invest in equities, not necessarily tied to commodities, and provide a total return of the S&P GSCI through a swap with Societe Generale, Lyxor’s parent company, said Nizam Hamid, deputy head of Lyxor ETFs in London. Lyxor has two other commodity-based ETFs tied to the CRB which started in 2006 and now have 1.2 billion euros ($1.52 billion) in assets, Hamid said.
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Source: Bloomberg
MTS Licences Lyxor for Macro Weighted Government Bond Indices
January 11, 2011--MTS, Europe’s premier facilitator for the European electronic fixed income market announced that it has granted an exclusive license to Lyxor International Management to create ETFs based on its new EuroMTS Macro-Weighted AAA Government Bond Indices.
These new indices use an innovative weighting method based on a balanced selection of macro-economic indicators measuring the real economic situation of eurozone countries with the highest credit rating.
Lyxor’s ETFs, listed on NYSE Euronext since early December, track the EuroMTS Macro-Weighted AAA All-Maturities and three maturity sub-indices, the 1-3 years, 5-7 years and 7-10 years.
Jack Jeffery, CEO of MTS, said: “We are very happy that Lyxor International Management has chosen to use our new index range for their ETFs. We believe that there will be strong investor demand for products that track the effective economic strength of the countries while at the same time limiting the involved risk thanks to the high credit quality required for the underlying securities”.
The methodology of the EuroMTS Macro-Weighted Index range uses the following indicators in establishing each country’s weight within the index:
GDP
government debt as a percentage of GDP
current account as a percentage of GDP
quarter-on-quarter GDP growth
long-term interest rates
Country weightings are reviewed on a quarterly basis, while bond selections and weightings are rebalanced monthly, in line with the classic MTS Index.
The EuroMTS Macro-Weighted Government Bond Indices are calculated and published in real time. They are freely-available on our new website www.mtsindices.com and through major data vendors.
Source: MTS Group
EDHEC-Risk Institute Draws the French Government’s Attention to the Inadvisability of Imposing a Tobin Tax in France
January 11, 2012--In an open letter dated January 10, 2012 addressed to the French Prime Minister, which itself referred to a previous letter addressed to the European Internal Market and Services Commissioner, Michel Barnier, EDHEC-Risk Institute has underlined the difficulties and risks associated with implementing a tax on financial transactions in France.
On the basis of a position paper* by Raman Uppal, Professor of Finance at EDHEC Business School, EDHEC-Risk Institute’s recommendations are structured around theoretical evidence on financial transaction taxation, empirical evidence on its effects, as well as the implementation challenges of such a tax. The key findings from this study are as follows:
The findings of theoretical models are mixed about the effectiveness of the “Tobin tax” to reduce volatility and improve welfare. The Tobin tax will obviously lead to a reduction in the trading of securities on which the tax is imposed. But, a reduction in the trading of financial securities also means that it is now more difficult to use the financial markets to smooth consumption over time and in different economic conditions. The Tobin tax reduces speculative activity in financial markets; but, this tax also drives away investors who provide liquidity and stabilise prices. Thus, introducing a Tobin tax has both advantages and disadvantages, and the net effect on volatility is likely to be small.
2011 in Retrospect: “Transparency in Energy Markets”
January 11, 2011--In 2011, the
“Transparency in Energy Markets” (www.transparency.eex.com) platform – the central publication location for energy market data, such as regarding the installed capacity, scheduled and unscheduled power plant outages and on the planned and actual generation
of power – was further expanded and improved.
In the framework of the publication of statutory requirements, fundamental data regarding the generation of power in Austria has also been published since 22 July 2011. At the same
time, the existing voluntary messages by Austrian power plant operators were expanded considerably. In addition to this, BASF and Volkswagen became the first industrial power plant operators to provide information in the statutory segment and PCK became the first
industrial operator to provide information in the voluntary segment in addition.
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Source: EEX
Powernext Energy Savings: Launch Of The Organised Market For Energy Savings Certificates On 10th January 2012
January 11, 2012--Powernext launched the Energy Saving Certificate (in French “Certificats d’Economies d’Energie” or CEE) organised market on 10th January 2012. This launch follows a study made in close cooperation with the market actors since 2009. After a first phase of obligations (2006-2009) where the objective was largely exceeded without any heavy involvement of the market,
the much more ambitious second phase (2011-2013) shows a greater development of the activity on the CEE secondary market.
Within this context, Powernext has launched an anonymous and secure multilateral spot trading platform to bring transparence and structure to a market still in its developing phase.
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Source: Mondovisione
Sarkozy Pushes Financial Transaction Tax While Seeing Risk of Going Solo
January 10, 2012--France will lead the way on taxing financial transactions in an effort to spur other countries into joining, President Nicolas Sarkozy said.
“If France waits for others to tax finance, then finance will never be taxed,” Sarkozy said today in a speech in the eastern French city of Mulhouse.
A unilateral levy is opposed by France’s financial community and its feasibility was questioned today by one of Sarkozy’s own ministers. It has become a political challenge for the president, who faces elections in a two-round vote in April and May this year and wants to make good on a pledge he made to impose such a tax when France last year held the presidency of both the G-8 and G-20 group of countries.
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Source: Bloomberg
Ex BlackRock ETF guru Fuhr not joining BoAML as role axed
January 10, 2012--Ex BlackRock ETF guru Fuhr not joining BoAML as role axed
Former BlackRock ETF expert Deborah Fuhr will not be joining Bank of America Merrill Lynch, as the role of head of global delta one strategy has been axed.
Fuhr, who was previously global head of ETF research and implementation strategy at BlackRock, was set to join BoAML in the third quarter of last year.
A spokesperson for BoAML said: 'Due to organisational changes the role of head of global delta one strategy will no longer exist at Bank of America Merrill Lynch.
'As such it has been mutually agreed that Deborah Fuhr will not join the bank. We wish her every success in her endeavours.'
Fuhr left BlackRock in July, and her departure was followed by that of her deputy, Shane Kelly, who has joined BoAML.
In her new role, she was due to report to Pier Butler, who is head of the EMEA global equity, macro and events group.
Rather than heading up ETF research, as Fuhr did in her previous roles, she was set to work on other aspects of ETF development and trading, as well as other delta one products.
Both Fuhr and Kelly worked at BlackRock since it acquired Barclays Global Investors in 2009. The duo joined BGI in 2008, having previously worked at Morgan Stanley.
Source: Citywire
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