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Eurozone fears push gold to new high
July 13, 2011--Gold prices hit a record $1 578.50 an ounce on Wednesday as concern over the eurozone debt crisis deepened, and after minutes to the Federal Reserve’s June meeting suggested some members were pondering the possible need for additional easing
The precious metal rose in a number of currencies, with gold priced in sterling and rand already hitting record highs on Wednesday and euro-denominated gold holding close to Tuesday’s record level.
S&P Equity Research, Showing Not All S&P 500 ETFs Alike, Favors SPY
Overweight-rated SPY rose 32.9% in 12 months versus Marketweight-rated RSP’s rise of 38.1%
July 12, 2011--An analysis of S&P 500 exchange traded funds (ETFs) by Standard & Poor’s Equity Research shows that not all such funds are alike and that investors must look under the hood at each fund’s stock weightings before choosing an ETF for their portfolios
In a comparison of the SPDR S&P 500 ETF (SPY) versus the Rydex S&P Equal Weight ETF (RSP), S&P Equity Analyst Todd Rosenbluth found that SPY had a relatively strong 12-month period as of June, rising 32.9%, but the ETF lagged RSP, which climbed 38.1%.
However, because RSP is constructed differently from SPY, giving equal weighting to all stock holdings in the S&P 500 versus SPY’s more heavily weighted holdings in the biggest companies, S&P Equity Research favors SPY with an Overweight rating compared to RSP’s lower Marketweight rating.
Foreign Exchange Intervention: A Shield Against Appreciation Winds?-IMF Working paper
July 12, 2011--Summary: This paper examines foreign exchange intervention practices and their effectiveness using a new qualitative and quantitative database for a panel of 15 economies covering 2004 - 10, with special focus on Latin America. Qualitatively, it examines institutional aspects such as declared motives, instruments employed, the use of rules versus discretion, and the degree of transparency.
Quantitatively, it assesses the effectiveness of sterilized interventions in influencing the exchange rate using a two-stage IV-panel data approach to overcome endogeneity bias. Results suggest that interventions slow the pace of appreciation, but the effects decrease rapidly with the degree of capital account openness. At the same time, interventions are more effective in the context of already ‘overvalued’ exchange rates.
view the IMF Working paper-Foreign Exchange Intervention: A Shield Against Appreciation Winds?
BlackRock New Report ETF Landscape: Industry Highlights - H1 2011
July 11, 2011--United States ETF and ETP industry:
The ETF industry in the United States had 1,039 ETFs and assets of US$973.5 Bn, from 29 providers on two exchanges. This compares to 846 ETFs and assets of US$693.2 Bn, from 30 providers on two exchanges at the end of H1 2010.
US$58.9 Bn of net new assets went into United States listed ETFs/ETPs in 2011 YTD. US$32.8 Bn net inflows went into equity ETFs/ETPs, of which US$20.3 Bn net inflows went into ETFs/ETPs tracking United States equity indices, while ETFs/ETPs tracking emerging market indices saw net outflows of US$2.8 Bn. US$18.4 Bn net inflows went into fixed income ETFs/ETPs, of which US$4.5 Bn net inflows went into government bond ETFs/ETPs and US$3.7 Bn net inflows went into corporate bond ETFs/ETPs. US$3.7 Bn net inflows went into commodity ETFs/ETPs, of which US$4.3 Bn net inflows went into ETFs/ETPs providing exposure to agricultural commodities, while ETFs/ETPs providing exposure to precious metals saw US$2.1 Bn net outflows. US$5.7 Bn net inflows went into leveraged and inverse ETFs/ETPs in 2011 YTD, of which US$3.9 Bn net inflows went into leveraged inverse ETFs/ETPs and US$1.7 Bn net inflows went into inverse ETFs/ETPs.
YTD through the end of H1 2011, of the US$56.1 Bn net new assets into United States listed ETFs, Vanguard gathered the largest net inflows with US$20.9 Bn, followed by iShares with US$12.9 Bn net inflows, while Bank of New York had the largest net outflows with US$2.0 Bn in 2011 YTD.
Global ETF and ETP industry:
In the first half of 2011, ETFs and ETPs attracted US$82.6 Bn of net new assets, 27.4% above the level of 2010’s first half. Net inflows in H1 2011 indicate that the ETF/ETP industry is off to a much faster start this year, since this half has been historically slow in terms of net new assets. Global Assets Under Management (AUM) in ETFs increased 10% in H1 2011, and now total US$1.443 trillion.
At the end of H1 2011, the global ETF industry had 2,825 ETFs with 6,229 listings and assets of US$1,442.7 Bn, from 146 providers on 49 exchanges around the world. This compares to 2,252 ETFs with 4,570 listings and assets of US$1,025.9 Bn from 130 providers on 42 exchanges at the end of H1 2010.
Additionally, at the end of H1 2011, there were 1,162 other ETPs with 1,798 listings and assets of US$183.4 Bn from 57 providers on 23 exchanges. Combining ETFs and ETPs, there were 3,987 products with 8,027 listings, assets of US$1,626.1 Bn from 182 providers on 52 exchanges around the world. This compares to 3,075 products with 5,731 listings, assets of US$1,158.4 Bn from 156 providers on 44 exchanges, at the end of H1 2010.
The global ETF and ETP industry combined, had 3,987 products with 8,027 listings, assets of US$1,626.1 Bn from 182 providers on 52 exchanges around the world. This compares to 3,075 products with 5,731 listings, assets of US$1,158.4 Bn from 156 providers on 44 exchanges, at the end of H1 2010.
In the first half of 2011, global investment markets are faced with ongoing uncertainty on the outlook for the global economy; eurozone sovereign crisis; the EU's Greek crisis; concerns over the United States growth sustainability; the end of QE2; social and political unrest throughout the Middle East and northern Africa; unpredictable weather; and China's inflation problems. During this period, US$82.6 Bn of net new assets flowed into a broad spectrum of ETF products as investors responded to these events and were able to implement appropriate, highly focused investment strategies in a timely fashion.
ETFs are index based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. They have become popular and widely used investment vehicles to facilitate many investment and diversification strategies – from short-term tactical applications to longer-term strategic applications. The ETP industry includes other product structures such as grantor trusts, partnerships, commodity pools and notes.
The ETF industry’s 10% increase in AUM for the first half – from US$1.311 trillion to US$1.1443 trillion – exceeded the 4.0% semi-annual increase in the MSCI World Index in US dollar terms, and also topped the industry’s 1.0% decrease in AUM over the same period in 2010.
Industry asset flows in the first half illustrate yet again that ETF and ETP product trends have come to represent sound ‘proxies’ for investor views and sentiments across the full range of asset classes and global markets. ETFs offer immediate exposure to a large array of indices with the flexibility to be traded at any time with multiple brokers when markets are open. The products offer a menu of cost-effective, transparent products that deliver diversified market exposure – attributes that were highly valued during 2011’s tumultuous first half.
Demand for ETFs globally has surged as professional and retail investors alike have discovered their unique combination of benefits, such as versatility, transparency and significant cost advantages. The availability of cost effective, flexible, liquid, diversified investment products that enable rapid implementation of a comprehensive range of investment strategies has struck a chord with investors – during both bull and bear markets.
Growing confusion around the various structures, holdings and classifications of exchange traded funds and other exchange traded products has been highlighted by many investors, regulators, as well as in many articles in the press. Product differences can create differences in the tax and regulatory treatment, counterparty exposure and performance for the investor. Given the growth in the number of different product structures, and underlining investments, both retail and institutional, are embracing ETFs but we are also seeing them doing more due diligence and scrutinising products much more thoroughly before they implement their investment views though ETFs and ETPs.
Year to date through the end of the first half 2011, US$82.6 Bn of net new assets went into ETFs/ETPs. US$52.8 Bn net inflows went into equity ETFs/ETPs, of which US$50.9 Bn net inflows went into ETFs/ETPs tracking developed market indices and US$1.9 Bn net inflows went into ETFs/ETPs tracking emerging market indices. US$19.6 Bn net inflows went into fixed income ETFs/ETPs, of which US$4.5 Bn went into corporate bond ETFs/ETPs, while money market ETFs/ETPs experienced US$0.7 Bn net outflows. US$6.2 Bn net inflows went into commodity ETFs/ETPs, of which ETFs/ETPs providing exposure to agricultural commodities saw US$4.6 Bn net inflows while ETFs/ETPs providing exposure to precious metals saw net outflows of US$1.0 Bn. US$6.1 Bn net inflows went into leveraged and inverse ETFs/ETPs, of which US$4.0 Bn went into leveraged inverse ETFs/ETPs and US$2.1 Bn went into inverse ETFs/ETPs.
Comparing the first half of 2011 to the first half of 2010 we see significant shifts in the level and allocation of the flows. YTD through the end of H1 2011, US$82.6 Bn net new asset flows went into ETFs/ETPs, greater than the US$64.8 Bn net inflows over the same period in 2010. Net new asset flows into equity ETFs/ETPs were US$52.8 Bn YTD, greater than the US$23.7 Bn net inflows over the same period in 2010 while fixed income ETF/ETP net inflows were US$19.6 Bn YTD, less than the US$26.4 Bn net inflows over the same period in 2010. Net inflows into commodity ETFs/ETPs were US$6.2 Bn YTD, less than the US$14.8 Bn net inflows over the same period in 2010.
The challenging market conditions of 2011 have caused a significant shift in investors’ risk appetite and their desire for liquidity. During 2010, many investors found that ETFs met their need for greater transparency regarding cost, holdings, price, liquidity, product structure, and risk and return related to investment alternatives.
ETFs make it easier for investors to participate in all domestic asset classes, global regions and industry sectors. Most importantly, ETFs give investors the opportunity to participate where markets have been showing promise.
European ETF and ETP industry:
The European ETF industry had 1,185 ETFs with 4,050 listings and assets of US$321.2 Bn, from 40 providers on 23 exchanges. This compares to 961 ETFs with 2,912 listings and assets of US$218.0 Bn from 35 providers on 18 exchanges at the end of H1 2010.
US$20.5 Bn of net new assets went into European listed ETFs/ETPs in 2011 YTD. US$17.4 Bn net inflows went into equity ETFs/ETPs, of which US$6.7 Bn net inflows went into ETFs/ETPs providing exposure to European equity indices and US$5.8 Bn net inflows went into ETFs/ETPs tracking North American equity indices. US$3.0 Bn net inflows went into commodity ETFs/ETPs, of which US$1.1 Bn net inflows went into ETFs/ETPs providing broad commodity exposure and US$1.1 Bn net inflows went into ETFs/ETPs providing exposure to precious metals. US$1.0 Bn net inflows went into leveraged and inverse ETFs/ETPs in 2011 YTD, of which US$0.4 Bn net inflows went into inverse ETFs/ETPs, US$0.3 Bn net inflows went into leveraged ETFs/ETPs and US$0.3 Bn net inflows went into leveraged inverse ETFs/ETPs.
YTD through the end of H1 2011, of the US$19.2 Bn net new assets into European listed ETFs, iShares gathered the largest net inflows with US$9.4 Bn net new assets, followed by UBS Global Asset Management with US$3.9 Bn net inflows, while Lyxor Asset Management had the largest net outflows with US$2.4 Bn in 2011 YTD.
Asia Pacific (ex-Japan) ETF industry:
The Asia Pacific (ex-Japan) ETF industry had 264 ETFs with 376 listings and assets of US$61.2 Bn, from 67 providers on 13 exchanges. This compares to 183 ETFs with 286 listings and assets of US$48.7 Bn, from 60 providers on 13 exchanges at the end of H1 2010.
Japan ETF industry:
The Japanese ETF industry had 86 ETFs with 90 listings and assets of US$31.2 Bn, from seven providers on three exchanges. This compares to 71 ETFs with 74 listings and assets of US$25.4 Bn from six providers on two exchanges at the end of H1 2010. There are 184 ETFs which have filed notifications in Japan.
Latin America ETF industry:
The Latin American ETF industry had 27 ETFs, with 409 listings and assets of US$11.3 Bn, from four providers on three exchanges. This compares to 21 ETFs, with 257 listings and assets of US$8.4 Bn from three providers on three exchanges at the end of H1 2010.
Canada ETF industry:
The Canadian ETF industry had 195 ETFs and assets of US$41.7 Bn, from six providers on one exchange. This compares to 145 ETFs and assets of US$30.4 Bn from four providers on one exchange at the end of H1 2010.
ETFS Precious Metals Weekly: Gold Hits All-Time High in Euros on Portugal Debt Downgrade to Junk and Italy Contagion
July 11, 2011--Gold price rallies in US dollars and hits an all-time high in Euros. Moody’s downgrade of Portuguese government debt to junk last week and growing concerns about Italy’s fiscal accounts is driving the gold price up and the Euro down.
Gold futures positioning back at February 2011 levels. Although the gold
price has performed well recently, gold futures speculative net long positions have remained low, indicating that the metal is not overbought.
South African mine supply concerns build as labour unrest adds to rising tide of government mining regulation. The National Union of Mineworkers announced on July 6 that it had broken off negotiations with Anglo Platinum, the worlds no.1 global producer of platinum, adding to platinum supply concerns.
Gold spikes above $1,1540/oz and EUR1094/oz as Portugal sovereign debt downgrade and Italy contagion drive investors into perceived safe-havens. Italian 10 year government bond spreads over German bunds hit a 9 year high on fiscal concerns and concerns Moody’s downgrade of Portuguese debt to junk status last week would lead to further downgrades of Italian debt. Concerns that Greece may also be allowed some form of debt default appeared to add to investor fears. Much worse than explected US payrolls growth helped anchor expections of low US interest rates for the foreseeable future, providing another boost to the gold price.
European central bank rate rise fails to shore up the Euro. Although the ECB hiked rates 25bps last week, less hawkish commentary from ECB president Trichet and continued market focus on Europe’s inability to contain Greece’s sovereign debt problems kept downward pressure on the Euro. In this environment investor demand for gold has been strong, pushing gold up in US dollars and driving it to a new all-time high in Euros.
visit www.etfsecurities.com for more info
IMF Releases 2011 Financial Access Survey Data
July 11, 2011--The International Monetary Fund (IMF) has released the results of the second annual Financial Access Survey (FAS) through the online FAS database. The FAS database is available to the public and provides financial access indicators and accompanying metadata developed through the Access to Finance Project with initial financial support from the government of the Netherlands.
The Project was unveiled at the World Bank-IMF Annual Meetings in Istanbul in October 2009 (see Press Release No. 09/351) and the results from the inaugural FAS were released in the online database in June 2010.
The FAS database disseminates key indicators of geographic and demographic outreach of financial services, as well as the underlying data. The reach of financial services is measured by bank branch network, availability of automated teller machines, and by three key financial instruments: deposits, loans, and insurance. New data on outstanding deposits and loans of households were added for the 2011 FAS.
Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies - IMF Working paper
July 11, 2011--Summary: We analyze the link between nonperforming loans (NPL) and macroeconomic performance using two complementary approaches. First, we investigate the macroeconomic determinants of NPL in panel regressions and confirm that adverse macroeconomic developments are associated with rising NPL.
Second, we investigate the feedback between NPL and its macroeconomic determinants in a panel vector autoregressive (PVAR) model. The impulse response functions (IRFs) attribute to NPL a central role in the linkages between credit market frictions and macrofinancial vulnerability. They suggest that a sharp increase in NPL triggers long-lived tailwinds that cripple macroeconomic performance from several fronts.
Composite Leading Indicators (CLIs), OECD, July 2011
The OECD composite leading indicators point to slowdown in most major economies
July 11, 2011--Composite leading indicators (CLIs) designed to anticipate turning points in economic activity relative to trend, point to a slowdown in most major economies for May 2011.
The CLIs point to slowdowns in Canada, France, Germany, Italy, the United Kingdom, Brazil, China and India. In the United States, Japan and Russia tentative signs of turning points in the growth cycle are emerging.
The outlook for Japan should be interpreted with some caution, reflecting the necessarily higher degree of uncertainty in the relationships between the leading components of the Japanese CLI and overall economic activity in the wake of the March 2011 earthquake.
CME Group Announces The Launch Of New Yuan FX Futures Contracts - Innovative New Product Design Developed To Suit Global Customers' Needs
Innovative New Product Design Developed to Suit Global Customers' Needs
July 11, 2011--CME Group, the world's leading and most diverse derivatives marketplace and the largest regulated market for foreign exchange, today announced the launch of new foreign exchange (FX) futures contracts based on the Chinese Yuan (CNY), or Renminbi.
In order to meet growing global customer demand for products denominated in the Chinese currency, these innovative new futures contracts will be quoted in interbank (European) terms, reflecting the number of CNY per US dollar.
These futures products are aligned with the OTC market convention for non-deliverable forwards while providing the benefits of counterparty risk mitigation from exchange-traded derivatives. These new currency products, which will be listed on and subject to the rules and regulations of CME, will launch Monday, 22 August for September 2011 settlement and will be allocated to the IMM (International Monetary Market) Division.
A coalition of financial-services trade associations (the “Trade Associations”) today released a comprehensive set of requirements for establishing a legal entity identifier (LEI) system to aid regulators and industry in monitoring systemic risk.
July 11, 2011--A coalition of financial services firms and trade associations (the “Trade Associations” [i]), in coordination with the Global Financial Markets Association (ASIFMA/AFME/SIFMA, collectively known as GFMA), has presented to regulators a recommendation for the organizations that it believes are best suited to operate a global legal entity identifier (LEI) system to aid regulators and industry in monitoring systemic risk. The recommendation document can be found here: www.sifma.org/LEI-Recommendation-Process/.
The recommendation is the culmination of several months of work by the Trade Associations and GFMA as a first step in developing a global industry consensus on the requirements and standards for a viable, uniform and global LEI solution.
The Trade Associations, working through GFMA, now intend to consult further with the international regulatory community, as well as the recommended organizations and other parties, to understand fully the requirements that could make the global implementation and adoption of the LEI solution possible. This includes, as a top priority, working cooperatively with these parties in defining and establishing the LEI governance structure.