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DB Global Equity Index & ETF Research : European Weekly ETP Review: Signs of better days ahead
October 29, 2010--Investment Outlook
As far as market rallies go, the week just passed continued to show positive signs of one materializing. At the very least, this is the case from a cash flow perspective, though asset prices seem to be following suit, at a slower pace. Though delicate it might be, ETF market indicators are pointing to a return of investors in the equity market, a move that is accompanied by shifting value themes within the asset class.
Four key indicators are causing us to conclude so:
Solid inflows consistently surpassing the indicative €1 billion mark for the third week in a row, a level that is commensurate with a bull ETF market.
Equity inflows, totaling over €4 billion in the last three weeks, characterized by solid directionality, reveal clear allocations in both a regional as well as a strategic themes.
Return of domestic European equity benchmarked allocations (Euro Stoxx 50, Stoxx 600 etc), following four months of drought, with over €2 billion since the beginning of September 2010.
Continued stalling gold inflows following the end of Q3’10, amounting to roughly €200 million for October 2010, compared to €500 million for September and €600 million in August.
The general market mood also continued to improve, with most of the major European equity indices gaining ground. The Euro Stoxx 50 index rose by 1.2%, the CAC 40 Index: was up by 1.1%, the DAX: index rose by 1.8% and the FTSE 100: was up by 0.7%. The Euro lost ground against the US dollar and fell by 0.16%, and gold (USD) saw a sizeable price drop of 2.9%. The demand in gold benchmarked ETFs is likely to be lagging due to shifting value themes in the equity market.
Following the Summer’s slow flow months, the ETF market is entering the last stretch of the year set to deliver strong growth. This is primarily driven by returning domestic equity investors as well as absence of significant outflows from one of the year’s biggest earners, gold ETFs.
Cash flow review
This week’s ETF cash flows totaled €1,232 million, slightly below those of last week’s. (€1,372 million). Asset class allocations favored equity, while fixed income experienced a moderate week and commodities experienced outflows, the first since the end of July 2010. Equity: inflows totaled €1,023 million (vs. €992 million inflow last week), fixed income received inflows of €342 million (vs. €344 million outflow last week) and commodities saw outflows of €121 million (vs. €17 million inflow in the previous week).
The overarching theme in the equity market is the return of investors to ETFs that track domestic European equity indices. Slightly over 50% of the week’s flows (€513 million) were allocated to European equity benchmarked ETFs for the week that ended on October 15 2010. This is the third consecutive week with significant European equity allocations. At the same time, cash flow allocations to emerging market (EM) benchmarked ETFs continued, albeit at a slightly slower pace than the preceding three weeks. Developed market (DM) investing is regaining its ground.
The big puzzle in the European market remains fixed income. While the European continent is traditionally a fixed income investor’s market, we have yet to see powerful and sophisticated investment themes – with the exception of €3.9 billion sovereign benchmarked ETF inflows during May and June – that compare to similar patterns in the US. Corporate bond benchmarked ETFs have received flows or just over €2 billion year to date.
While the ETF providers have been busy over the past year beefing up their fixed income product ranges with a number of more sophisticated products (such as short government, credit, sector) the vast majority of these products have not yet gathered assets that indicate that the market is embracing the asset class. The two notable exceptions have been sovereign and money market benchmarked ETFs.
Many theorize that market conditions have not been conducive for an uptick in fixed income ETF investing and should market conditions continue to improve, it will be interesting to see how investor adoption rates for fixed income ETFs might change. Gold products, which came to the European market long after fixed income, received €6.0 billion of inflows for 2010, while fixed income, excluding sovereign benchmarked ETFs, received a mere €2.4 billion for the same period.
The week that finished on October 15 2010 saw inflows of €342 million of fixed income inflows, with the largest beneficiary being money market ETFs (€146 million). Corporate bond benchmarked ETFs registered inflows of €92 million and sovereign benchmarked ETFs saw inflows of just €85 million.
New Product Launch and Listings Calendar
No new ETFs and ETCs were launched in Europe this week. However the continent’s cross-listing calendar experienced a very busy week with 59 new cross listings.
Switzerland benefited by most of the cross listing activity and it registered 49 newly cross listed ETFs. Deutsche Bank led the Swiss cross listing activity, by listing a broad spectrum of 24 sovereign, sector and credit benchmarked fixed income ETFs on the Swiss Stock Exchange. Amundi cross listed 24 of its ETFs on the same exchange, ranging from equity emerging market benchmarked ETFs as well as a variety of fixed income ETFs.
Lyxor cross listed 10 equity sector ETFs in France.
Rolling 30 day average turnover review
Total ETP turnover for the week rose by 0.9%, to €1.89 billion. Equity ETF turnover increased by 1.4% to €1.41 billion. Fixed Income ETF turnover: fell by 3.1`%, to €185 million. Commodity turnover rose by 2.2%, to €286 million.
Assets Under Management (AUM) roundup
The European ETP industry assets rose by 0.5% and finished the week at €212 billion. Equity market advances as well as healthy equity flows contributed to 0.8% increase of the European ETP AUM. However, the falling price of gold and lagging gold flows contributed a 0.4% fall. Fixed income with its marginal gains contributed 0.1% growth. Year to date, the European ETP AUM are up by a very healthy 24.6%, a growth that has primarily been trumpeted by strong inflows.
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Source: DB Global Equity Index & ETF Research
WSE sees huge demand ahead of IPO
October 29, 2010--Warsaw Stock Exchange (WSE) has raised more than 1bn zlotys (€300m) amid strong demand and set a debut price of 46 zlotys per share for institutional investors ahead of next month’s initial public offering.
The bourse said 323,000 retail investors subscribed for shares while demand was 25 times subscribed from institutional investors. Polish pension funds (OFE), Polish investment funds (TFI) as well as international investment funds, sovereign wealth funds and endowment funds all also subscribed for shares, the bourse added.
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Source: FT.com
EU sticks to 20 per cent carbon cuts
October 29, 2010--The European Union on Friday gave notice it was not prepared to go beyond a planned 20-percent cut in greenhouse-gas emissions ahead of next month's UN climate talks in Cancun, Mexico.
At the end of a summit in Brussels, EU heads of state and government said making progress on tackling climate change "is becoming ever more urgent."
"It is therefore important that the Cancun Conference deliver a significant intermediate step" towards a comprehensive climate treaty, they said in a statement.
"The European Union," they added, "will reassess the situation after the Cancun Conference including the examination of options to move beyond 20 percent greenhouse gas emission reductions to be prepared to react to the ongoing international climate negotiations."
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Source: EUbusiness
Many countries, one market
October 28, 2010--New rules for the EU's single market will make it easier to live and do business anywhere in Europe.
The single market is a cornerstone of the EU. It was set up so that people, goods, services and capital can move freely throughout the European Union.
But gaps remain between the rules and what businesses and people still face when they operate or move across borders. The commission has unveiled two sets of actions to help ensure the single market continues to improve people’s lives and make the EU economy more competitive.
The Single Market Act will simplify life for small businesses, which make up more than 99% of Europe’s companies and help fix the problems faced by people when they travel, study, work, get married, buy a house or car in another EU country.
The 50 actions on the single market include:
giving small businesses easier access to finance, simplifying accounting rules and improving access to public contracts
fostering social entrepreneurship to improve access to food, housing, health care, jobs and banking services
ensuring copyright holders, including artists, can sell their work throughout the EU to boost online commerce
cutting red tape in recognising all professional qualifications throughout the EU by introducing professional I.D. cards
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Source: European Commission
STOXX introduces Equal Weighted version of European Benchmark Index
October 28, 2010--STOXX Limited, a global index provider and creator of the leading European equity indices, today announced the launch of the STOXX Europe 600 Equal Weighted Index, which represents the components of the well-known STOXX Europe 600 Index irrespective of their market capitalization by weighing them equally.
The new index is designed to underlie financial products such as exchange-traded funds (ETFs) or structured products.
“With the launch of the STOXX Europe 600 Equal Weighted Index we take a new weighting approach to Europe’s most widely recognized benchmark index,” said Hartmut Graf, chief executive officer, STOXX Ltd. “Our new index is a superior tool for market participants who seek exposure to an equal weighted portfolio consisting of European small, mid and large cap companies, while being able to rely on the transparent and rules-based methodology of the widely recognized STOXX Europe 600 Index.”
The STOXX Europe 600 Equal Weighted Index follows the same methodology as the STOXX Europe 600 Index, except for the weighting process. In the new index, all components share an equal weight, leading to a stronger exposure to small cap companies from 5% to 33%, while reducing the overall weight of large cap companies from 83% to 33%. As relative weights shift over time, the index is rebalanced quarterly and weights are brought back to equal allocations.
The STOXX Europe 600 Equal Weighted Index is reviewed simultaneously with the STOXX Europe 600 Index on a quarterly basis in March, June, September and December. It is available in price, net and gross return versions, and is calculated in Euro and U.S. Dollar (USD). Daily history is available back to December 31, 1991 for the price and net return versions, and back to December 31, 2000 for the gross return version.
Further information on the STOXX Europe 600 Equal Weighted Index is available on www.stoxx.com.
Source: STOXX
A new ETF by Lyxor begins trading on the Spanish Stock Exchange
The first SICAV-style ETF on the Spanish stock exchange
October 28, 2010--The Spanish stock exchange has begun trading the Lyxor ETFS&P500, a new exchange traded fund (ETF) issued by Lyxor Asset Management, Société Générale’s asset manager. This ETF, which tracks the S&P 500, is the first SICAV-style exchange-traded fund to be traded on the Spanish stock exchange following recent legal changes to allow trading in this investment product.
The ETF segment of the Spanish stock exchange started up on 20 July 2006 and after the incorporation of the Lyxor ETFS&P500 it now has 41 exchange-traded funds.
Trading volume in the ETF segment to the end of September was up 116% year-on-year, at €5.13 billion. The number of trades during the same period totalled 52,858, which exceeds total trades for all of 2009.
Exchange traded funds (ETFs) are a hybrid investment vehicle between funds and shares that combine the best of both worlds in a single stock exchange trade.
Source: Bolsa de Madrid
Bank of Ireland in successful return to bonds
October 28, 2010--Bank of Ireland has sold the first public Irish bank bonds since April in a deal that could signal renewed market willingness to look at investments in the troubled country.
The bank, considered the least damaged of the country’s big financial institutions, sold €750m (£655m) of two-and-a-half year, government-guaranteed bonds amid strong demand that helped increase the sale from the original €500m.
Ireland and its banks have struggled to tap the public markets for much of this year because of concerns about the government’s ability to support its struggling financial sector, which is still reeling under the losses from a property lending spree.
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Source: FT.com
ETF Landscape: STOXX Europe 600 Sector ETF Net Flows, week ending 22-Oct-10
October 27, 2010--Last week saw US$179.5 Mn net inflows to STOXX Europe 600 sector ETFs. The largest sector ETF net inflows last week were in banks with US$86.9 Mn and automobiles and parts with US$23.8 Mn while media experienced net outflows of US$12.6 Mn.
Year-to-date, STOXX Europe 600 sector ETFs have seen US$878.7 Mn net inflows. Banks sector ETFs have seen the largest net inflows with US$371.3 Mn, followed by basic resources with US$132.8 Mn while food and beverage has experienced the largest net outflows of US$164.3 Mn YTD.
The US$10.6 Bn AUM invested in the ETFs is greater than the US$4.2 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 18 out of 19 sectors.
Source: Global ETF Research & Implementation Strategy Team, BlackRock
CESR Publishes Data On Prospectuses Approved And Passported In The EU From January 2010 To June 2010 (Ref: CESR/10-1175)
October 27, 2010--INTRODUCTION
CESR published in June 2007 its “Report on the supervisory functioning of the Prospectus Directive
and Regulation” (CESR/07-225) that included some statistical data in relation to the number of
prospectus approved and passported for the periods July 2004 to June 2005 and July 2005 to June 2006
(with quarterly disclosure).
Despite the limitations and caveats highlighted when publishing the data, the European Commission
and market participants considered the information very useful and welcomed CESR’s initiative.
For this reason, CESR has decided to formalise this exercise and to keep on collecting this data on a regular
basis (with a quarterly disclosure).
CESR published on 13 June 2008 some tables compiling the data for the period July 2006 to June 2007, on 10 July 2008 the data for the period July 2007 to December 2007, on 14October 2008 the data for the period January to June 2008, on 30 March 2009 a compilation of the data for the period July 2006 to December 2008 (with a quarterly disclosure), on 18 September 2009 the data for the period January 2009 to June 2009 and on 11 March 2010 the data for the period July 2009 to December 2009.
Following those publications, CESR is publishing today the tables below compiling the data for the period January 2010 to June 2010 (with a quarterly disclosure).
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Source: CESR
OJSC "Russian Trading System" Stock Exchange And Standard & Poor’s Invite Issuers And Management Companies To Participate In The Annual Working Meeting On November 19, 2010
October 27, 2010--On November 19, 2010 in Moscow an annual working meeting of OJSC RTS with issuers and management companies will take place. Within the framework of the meeting RTS’s partner Standard & Poor’s will present findings of a research on information transparency of the biggest Russian public companies in 2010.
Workshop on annual reports preparation will also be held. At the workshop current trends and different aspects of companies information disclosure will be reviewed.
By tradition the solemn ceremony of awarding winners of the 13th Annual Report Competition will conclude the meeting with issuers and management companies. This year the record number of Russian and foreign companies took part in the Competition over its history.
To participate at the meeting please, register by completing a registration form at the RTS Competition’s site until November 18, 2010.
For more detail, please contact Litovchenko Svetlana by phone: +7 (495) 705-9031 or by e-mail: ar@rts.ru.
Source: RTS Exchange
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