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Bond yields of fragile eurozone members hit records
March 11, 2011--Bond yields of the most financially fragile eurozone members hit fresh records on Friday as eurozone leaders began talks on stepping up policy coordination to tame a debt crisis that threatens to claim new victims.
The yield on 10-year bonds from Portugal, which is widely seen as likely to be the next eurozone member to need a bailout, rose to 7.479 percent at 1700 GMT from 7.404 percent late on Thursday.
Portugal had also announced Friday it will adopt more austerity measures to ensure its public deficit meets EU norms by 2012.
DB Global Equity Index and ETF Research : ETF investors return with a vengeance: €1.9 billion of inflows across all asset classes
March 10, 2011--Impressive cash flows of €1.9 billion across the board
The week that just passed went down as the strongest yet cash flow week for 2011. The ETP industry gathered close to €2 billion of new money and there was strong positive cash flow directionality for all major asset classes. Year to date, cash flow figures reached the €7 billion mark which translates to a healthy weekly average of €800 million inflows.
Domestic European equity allocations on the rise
European equity developed market benchmarked ETFs received the bulk of the net cash inflows, totaling €1.1 billion. This is in sharp contrast to the last few weeks where non-European developed market ETFs dominated the equity cash flows.
The most prominent recipient among the European developed market ETFs were the DAX benchmarked ETFs, with weekly inflows that totaled €547 million. This comprised around half of the total equity inflows for the week. Historically we have seen significant inflows in DAX ETFs just prior to the dividend season which is typically followed by the unwinding of these positions once the dividend withholding tax benefits are realized. The next couple of weeks should be interesting to observe if the current inflows into DAX ETFs are based on longer term fundamental based allocations or on tax optimization dividend trades.
Developed non-European equity ETFs flows [primarily US benchmarked] extended their good run and added €179 million taking their year to date net inflow figures to €2.6 billion, making them the most sought after ETF segment in 2011 overall. Equity ETFs have had a positive impact on equity cash flow figures throughout the year; a trend which also continues with real estate benchmarked ETFs adding €128 million of the total €233 million inflows in this segment.
Emerging market flows grind to a halt as investors try to decipher impact of the latest commodity market developments
With rising commodity prices [especially oil] and increased political instability in the MENA region, investors seem to be pausing for thought when it comes to emerging markets (EM) investing. Until the dust from the latest events in the MENA region settles, ETF cash flows indicate that investors are adopting a ‘wait-and-see’ stance. EM benchmarked ETF flows continued to decline this week, with net flows close to zero. Flows into global EM indices [such as the MSCI EM] were negative, registering outflows of €118 million, while single country benchmarked ETFs saw net inflows of €116 million.
Traditional safe heaven assets benefit from turbulence in the Middle East
The Middle East turbulence has benefited European money market benchmarked ETFs, and, primarily corporate treasurers, channeling €476 million in the region’s less volatile fixed income section. Year to date money market funds have registered healthy flows of €722 million.
A similar trend has been materializing in gold ETPs, a segment that has witnessed increased positive cash inflows since the Middle Eastern turmoil began a few weeks back. Gold ETPs started the year with negative cash flows, but their trajectory has reversed direction and they are slowly inching back to positive territory with net positive cash inflows in the past three weeks. Current weekly cash flow figures for gold ETPs reached €145 million with the year to date net outflows of €302 million.
Balance is finally emerging in commodity ETP space
An interesting investment paradigm is emerging the commodities ETP sector. For the first time in more than a year, gold is not dominating the sector. Instead, this week’s healthy €442 million were sourced from primarily four segments: diversified commodity indices, precious metals and energy.
Year to date, commodity ETPs have received €1.3 billion of inflows. Adjusting for gold outflows this number inches closer to €1.6 billion, well surpassing comparable levels last year. In 2010, non-gold commodity ETP cash flows totaled just 2.4 billion for the twelve month period. So far this year we are at over half of that number in the first two months of the year.
Assets Under Management (AUM): Strong inflows and declining markets lead to moderate increases in AUM
Total European ETP assets increased by 0.6% and ended the week at €237.8 billion. Strong inflows into equity ETFs offset the decline in equity markets and let to equity ETFs ending the week at €153.6 billion; resulting in a moderate increase of 0.3% week on week. The French CAC Index & Euro Stoxx 50 indices declined by1.2% respectively while the UK’s FTSE 100 & German DAX lost 0.1% week on week.
Commodity ETFs had the dual advantage of rising prices and healthy inflows and thus ended the week with a generous AUM increase of €726 million (1.9%). Fixed Income ETFs saw an increase in assets under management by €221 million and ended the week at €41.8 billion.
On-Exchange Total Weekly Turnover: Commodity led decline
Weekly on exchange ETP total turnover declined by 4% to end the week at €12.4 billion. Commodity turnover declined by more than 20% (€ 490 million) reaching €1.8 billion. Fixed Income turnover gained a healthy 24.7% to reach €1.1 billion. Equity turnover declined moderately by 2.3% and ended at €9.4 billion.
ETP Product Launch Calendar: 9 new launches, 7 cross listings, first infrastructure ETF
Product launches resumed in the past week with 9 new product offerings and 7 cross-listings in the European ETF space.
ETF Securities launched 3 equity and 1 alternative benchmarked ETF on the London Stock Exchange. 2 equity ETFs were launched which track the Dow Jones Brookfield Infrastructure Indices with Global and Emerging markets exposures respectively. An ETF tracking the performance of the Dow Jones Global Select dividend index was also introduced in the past week.
The ETFX Bofaml IVSTOXX ETF is the first in Europe which tracks the forward implied volatility of the popular pan Euro-zone benchmark, the Euro Stoxx 50.The ETF tracks the Euro Stoxx 50 Investable Volatility Index which targets a constant 3-month (90 days) forward, 3-month maturity volatility exposure.
Blackrock launched 2 equity thematic ETFs which track the Dow Jones Europe sustainability index and the Dow Jones Global sustainability index respectively.
Amundi launched 2 equity ETFs tracking the MSCI Europe ex UK Index and the FTSE UK dividend plus Index respectively.
HSBC supplemented its recently launched series of country ETFs based on MSCI country indices with the launch of the MSCI Mexico capped ETF. This was listed on the London Stock Exchange.
Lastly, UBS cross listed 4 commodity and 3 equity ETFs on the Swiss Stock Exchange. The Commodity ETFs are based on the Bloomberg Constant Maturity Commodity Indices and are denominated in both Swiss Franc and US Dollars. The 3 equity ETFs are based on broad US benchmarks.
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ICMA-ERC survey confirms long term recovery in European repo market activity to pre-crisis levels
March 10, 2011--The European Repo Council of the International Capital Market Association (ICMA) today released the results of its 20th semi-annual survey of the European repo market, undertaken in December 2010. The survey sets the baseline figure for market size at EUR 5,908 billion representing a modest year-on-year increase of 6% on the figure of EUR 5,582 billion for the survey in December 2009.
There was a sharp fall from the headline total of EUR 6,979 recorded in June 2010, but this figure included unusual specialised transactions that have subsequently been unwound. The results of the latest survey confirm the continuing trend of modest recovery in the European repo market towards pre-crisis levels. The survey is based on returns received from 57 offices of 55 financial groups, mostly banks, including most of the largest European repo market participants. It is a snapshot of the size of the market in terms of the volume of outstanding transactions on a date in December; it does not include the value of repos undertaken by Central Banks as part of their intervention in the market, which would clearly have been important.
EU promises fundamental reforms of ratings agencies
March 10, 2011--The EU's executive Commission said on Thursday it would propose within six months fundamental reforms on the regulation of financial ratings agencies, as a second eurozone country was hit by a downgrade within days.
The last few days highlight once again how important (is) a more and better regulated environment for ratings," the economic affairs commissioner, Olli Rehn, and the commissioner in charge of financial services, Michel Barnier, said in a joint statement.
"Our services are now working as quickly as possible" on a package of reform proposals, the statement said, adding that the package was "due before the end of the summer."
iShares S&P 500 becomes the largest ETF in Europe
March 10, 2011--Total assets under management (AUM) for the iShares S&P 500 have reached USD9.2 billion, making it the largest ETF and index fund in Europe.
Since the start of 2011 more than USD1 billion of net new money has come into the fund, highlighting renewed investor appetite for equities and developed markets in particular. The fund provides access to one of the leading benchmarks for US equities, the S&P 500. Since iShares launched the ETF in Europe in 2002, the S&P 500 index has returned 26.98 per cent. Physically backed and fully replicating the index, the fund offers exposure to the 500 largest companies in the US by market capitalisation
ETF Landscape: European STOXX 600 Sector ETF Net Flows for Week Ending 04-Mar-2011
March 9, 2011--For the week ending 04 March 2011, there were US$67.7 Mn net outflows from STOXX Europe 600 sector ETFs. The largest sector ETF net outflows last week were in basic resources with US$49.8 Mn followed by industrial goods and services with US$48.0 Mn net outflows while oil and gas experienced net inflows of US$64.3 Mn.
Year to date, STOXX Europe 600 sector ETFs have seen US$1,408.8 Mn net inflows. Banks has seen the largest net inflows with US$561.1 Mn, followed by oil and gas with US$402.8 Mn net inflows while chemicals experienced the largest net outflows with US$109.0 Mn.
As of 04 March 2011, there is US$11.7 Bn AUM invested in the STOXX sector ETFs which is almost double the US$6.8 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 17 out of 19 sectors.
ETF Securities launches global dividend fund
March 9, 2011--ETF Securities has launched a global dividend exchange traded fund (ETF) in London, providing exposure to 100 leading dividend-paying companies across the globe.
The ETFX Dow Jones Global Select Dividend Fund invests in top dividend-paying companies across 10 sectors and up to 25 countries. The fund, which is part of ETF Securities’ equity ETF platform ETF Exchange, will track the Dow Jones Global Select Dividend Index. As a net total return index, all dividends will be automatically reinvested.
The average dividend yield is 5.74 per cent, which has been calculated monthly since September 2007. At the end of February 2011, the monthly dividend yield was 5.25 per cent.
Societe Generale launches a new generation of Actively Managed Trackers on the LSE
March 9, 2011--Societe Generale has announced the launch of a new generation of ‘Actively Managed
Trackers’ (AMT) on the London Stock Exchange. The bank can now offer Asset Managers the opportunity to deliver an actively-managed, diversified portfolio in a transparent exchange
traded product with a low management cost.
Asset Managers in partnership with Societe Generale can offer their clients an innovative product that benefits from active management, a lower minimum investment size and benefits from on-exchange liquidity. Using a securitised derivative wrapper rather than an open-ended
fund structure reduces the cost of creating and maintaining the product, thus allowing for a lower minimum trading size.
The aim of the AMT is to mirror the performance of a selection of underlying assets, so working like a classic tracker. The key difference, however, is that a “Weighting Manager Agreement” enables the Asset Manager (who will be regulated by the FSA and permitted to give investment advice) to change the weightings of each asset in the portfolio on a regular basis.
SIX Swiss Exchange Enhances Its Transparency Tool, Equity Liquidity Matrix, Now Covering All SPI Securities
The Improved Featured Service Further Increases Market Oversight For Investors And Market Participants
March 8, 2011--SIX Swiss Exchange expands its transparency tool, Equity Liquidity Matrix, to cover all SPI securities. Designed for investors trading Swiss Blue Chips as well as Mid & Small Cap securities, the free web-based tool highlights the quality of the order books of SIX Swiss Exchange.
As the reference market for Swiss securities, SIX Swiss Exchange is assuring liquidity across its entire spectrum of equities in order to maintain a transparent, reliable and efficient price finding mechanism. By enlarging the Equity Liquidity Matrix (ELM) service to the Mid & Small Cap securities, SIX Swiss Exchange further increases market transparency as well as public awareness of the negative effects of market fragmentation.
MEPs call for the introduction of a tax on financial transactions
March 8, 2011--The EU should promote the introduction of a financial transaction tax, even if it is alone in doing so "as a first step", says Parliament in a resolution on innovative financing voted in plenary on Tuesday. A second resolution, also voted in plenary on Tuesday, calls for more EU tax-related assistance and clamp downs on tax evasion and tax fraud to boost revenue and efficiency in the developing countries.
Together, the Economic Affairs Committee resolution on "innovative financing", and the Development Committee one on "tax and development" set out Parliament's ideas on how best to generate new revenues, reform tax governance and maximise revenue from traditional sources.
The innovative financing resolution, drafted by Anni Podimata (S&D, GR), argues that the tools proposed can yield a "double dividend" by not only generating more funds, but also making the financial sector safer and society greener.
The tax and development resolution, drafted by Development Committee Chair Eva Joly (Greens/EFA, FR), says that EU and developing countries should seek to boost their tax revenues by combating tax evasion and harmful tax practices. This, it says, will not only reduce poverty but also eventually lead to a "governance dividend".
