Global ETF News Older than One Year
IEA calls halt to emergency oil release
July 21, 2011--The International Energy Agency has decided not to repeat a highly unusual decision to draw on strategic oil reserves, while defending the original release as successfully meeting a “market need”.
The western countries’ oil watchdog made 60m barrels available for 30 days after June 23, saying this would cover the loss of Libyan output before other Opec members could raise their production.
Source: FT.com
EDHEC-Risk Institute proposes an integrated approach to sovereign wealth risk management
July 21, 2011--This new publication, "An Integrated Approach to Sovereign Wealth Risk Management," contains the results of the second-year research work conducted at EDHEC-Risk Institute within the Deutsche Bank research chair on asset-liability management (ALM) techniques for sovereign wealth fund (SWF) management.
The publication extends earlier work on the optimal investment policy and risk management practices of sovereign wealth funds by integrating these funds into the economic balance sheets of their sponsoring countries. This echoes recent advances in corporate pension fund management that consider the fund an integral part of the corporate balance sheet and jointly analyse capital structure and pension fund allocation choices. The research shows how to derive the optimal asset allocation for sovereign assets given different drivers of economic risks as well as varying degrees of indebtedness.
It puts forward a model that decomposes a SWF’s demand for risky assets into a combination of speculative and hedging demands. Speculative demand is the demand for assets which maximise risk-adjusted returns while total hedging demand arises from liability-hedging motives and from the demand for assets whose dynamics mitigate fluctuations in combined sovereign assets or lessen shocks to government budgets. Assets with low correlation with changes in the sovereign’s budget or that offer insurance against tail risks for the sponsor are desirable from a hedging perspective. Speculative demand is an important driver of total asset demand only if risk aversion is low or if financial wealth is very large relative to the underlying economy. Other things equal, (high) economic leverage is found to (strongly) reduce speculative demand while leaving hedging demand unchanged.
The publication comments on the asset allocation implications of both the key budgetary risks and the leverage of China, Russia, and Gulf Cooperation Council countries. It also uses an empirical application to illustrate the impact of leverage and the relevance of dynamic allocation for a commodity SWF.
view the : An Integrated Approach to Sovereign Wealth Risk Management report
Source: EDHEC-Risk Institute
Fuhr Steps Down From ETF Role At BlackRock
July 21, 2011--Deborah Fuhr, one of the leading lights at BlackRock (BLK) and a former FN100 Women in Finance, has stepped down from her role as head of exchange traded fund research at the world's largest money manager.
BlackRock's ETF Landscape research, some of the most in-depth analysis into the trillion dollar ETF industry, has been moved under the BlackRock Investment Institute umbrella, led by Lee Kempler.
Source: Wall Street Journal
WFE Market highlights for first half-year 2011
The World Federation of Exchanges today published market data for the first half of 2011
July 21, 2011--Trading on stock exchanges:
In terms of value1 of shares traded, the WFE member exchanges accounted for a total of USD 32.1 tn in the first six months of 2011. (table 2a)
Compared with the first six months of 2010, volumes were stable (-0.8%), but this relative stability conceals significant regional differences as the Americas’ trading decreased by 9.3% whereas Asia-Pacific’s volumes rose by 13.8%
The Americas decrease is mostly due to US exchanges (which represent 91% of the regional total value of share trading, and 45% of the WFE total). The combined US figures were down 11.3% in the first half of 2011 compared to the same period in 2010. The value of share trading in most of the other exchanges in the region increased during the same period.
In the Asia Pacific region (up 13.8% globally), all the exchanges’ USD value of share trading increased, except for the two Indian exchanges.
The EAME region situation was much more contrasted with significant discrepancies among exchanges. Total value of exchange trading in EAME increased by 3.2%.
Source: WFE
ETF systemic risk threat 'overblown'
July 20, 2011--Concerns among regulators that synthetic exchange traded funds could pose the threat of systemic risks in the banking sector are “overblown”, according to analysts at Bank of America Merrill Lynch.
“Synthetic ETFs do not pose a risk to global financial stability, nor do they present any meaningful risks to ETF investors,” said Jon Maier, ETF strategist at BofA Merrill Lynch.
Source: FT.com
Investors warned of Chinese bond risks
June 20, 2011--It is well known that international bond investors have loaned tens of billions of dollars to Chinese companies in recent years and that some of those companies, notably Sino Forest and China Forestry, are now in distress.
Less well known, however, is the fact that almost every Chinese borrower that has tapped the international markets for funds has done so through a circuitous route that exposes investors to considerable risk.
Source: FT.com
Deutsche Bank - Equity Research - Global-Q2-11 ETP Market Review & Outlook : ETF market carried forward by strong flows
June 20, 2011--Q2-11: ETP assets grow driven by inflows in the midst of declining asset prices
Last quarter markets started on risk-on mode underpinned by overall positive economic data during Q1-11. In April, equity benchmarks around the globe delivered positive returns. However as we entered May, the consequences of Japanese related disruptions and the spike in gas prices, coupled with speculation regarding the end of the Fed’s QE2 program, the development of a new chapter on the Greek Sovereign crisis, fears about the Chinese economy slowing down, and debt ceiling discussions in the US, all permeated into the economy and the markets resulting in the reversal of the risk-on trade.
During most of May and June, investors engaged in a defensive trade, by selling risky assets in pursuit of safety. A last minute rally, occurring in the last week of June, nevertheless, helped to lessen the losses for the quarter. At the end of the quarter, the S&P 500 and the MSCI EM (USD) recorded losses of 0.39% and 1.15%, respectively; while the MSCI EAFE (USD) experienced gains of 1.56% (mostly from USD weakening).
The global ETP industry grew by 2.7% (10% YTD) and reached $1.58 trillion in Q2-11, primarily helped by strong inflows across all regions. In USD terms, the Asia Pacific ETP market reached $92 billion and was the best performing market adding 7.2% (9% YTD) in AUM growth, followed by the European ETP market with 4.1% (13% YTD) growth and $349 billion in AUM (1.9% growth in € terms and €241 billion in AUM), then the US ETP market with a 2.0% (9% YTD) expansion and $1.08 trillion in AUM, and finally, the Rest of the World with flat growth (9% YTD) and $59 billion in AUM.
Most of the 2.7% growth in the global ETP industry during Q2-11 came from inflows (+3.0%), while contracting asset prices offset part of the inflows growth (-0.3%). Asset flows for the quarter were strong, totaling $47 billion and they were slightly down for the same quarter last year ($49.1 billion).
The US market accommodated 62.5% of all new flows, while Europe, Asia-Pac and the Rest of the World accounted for 20.9%, 14.5%, and 2.2%, respectively. ETP flows in Q2-11 were significantly more concentrated than Q2-10. Equity, fixed income, and commodity ETP flows breakdown was 72%, 26%, and -3% last quarter vs. 43%, 30%, and 26% on Q2-10, respectively.
Global flows trend (long only ETPs)
Long equity ETPs received $33.2 billion in new flows during Q2-11 with good momentum in the beginning and end of the quarter and a somewhat slower/flat mid quarter period. Fixed income funds, on the other hand, received steady new contributions throughout the quarter adding up to $10.5 billion by the end of this period. Meanwhile, commodity products experienced some inflows during April, but these reversed later on.
Equity ETF Market: sailing amidst choppy seas
Equity ETP allocations favored EM products the most with $11.9 billion in inflows during the quarter, followed by DM ex US, US-focused, and Global ETPs with $9.9 billion, $8.5 billion and $2.9 billion, respectively.
In terms of sector rotations, investors engaged in a defensive trade by allocating $4.7 billion of cash into defensive sectors such as Healthcare (+$2.5 billion), Consumer Staples (+$1.3 billion), Utilities (+$662 million), and Telecom (+$262 million); while taking $3.1 billion of money out from global cyclical sectors such as Energy (-$3.2 billion) and Materials (+$50 million). In the meantime, domestic cyclical sectors (i.e. Financials, Technology, Consumer Discretionary, and Industrials) remained oscillating mostly between -$1.0 billion and +$1.0 billion throughout the quarter.
Fixed Income ETF Market: quality, quality, quality
Underpinned by increasing uncertainty and a flight from risky assets, fixed income products experienced a very active quarter during Q2-11. However not all categories or credit buckets were equally favored. Sovereign and Corporates products received the largest inflows each with about $3.8 billion; while Money Market ETPs experienced the largest outflows with $2.0 billion.
In terms of quality, investment grade products captured most of the new flows during the quarter with $6.3 billion in inflows, followed by mixed quality portfolios with $3.8 billion. On the other hand, high yield ETPs were dumped by investors and ended the quarter relatively flat (+$151 million) as the focus changed from risk to quality and safety.
Commodity ETF Market: silver bubble, risk-off trade and gold
Commodity products experienced $2.0 billion of outflows during Q2-11. Most of the sectors experienced outflows with the exception of Industrial Metals and Livestock which experienced nominal inflows of $116 million, and $8 million, respectively. On the other hand, Energy products experienced the largest outflows of $931 million.
At a sub sector level we find that gold products were the big exception within the commodity products. Gold ETPs received inflows for $2.0 billion driven mostly on the basis of the safe haven and value protection argument. On the contrary, Silver, Broad Agriculture, Broad Commodities, and Crude Oil experienced the most significant outflows of $2.4 billion, $612 million, $518 million, and $449 million, respectively.
Large providers dominate the US; while medium sized providers gain ground in Europe and Asia Pacific
Provider competitive dynamics on a global level remained fairly stable among the top 5 global providers. Year to date, Blackrock (nu.1, 40.3%) and StateStreet (nu.2, 16.6%) have lost 0.9% and 0.6% of market share respectively, while the world’s number 3, Vanguard has gained 0.8% reaching 11.0%.
US market dynamics remain tilted towards the Tier 1 providers which recovered 0.1% of market share at the expense of smaller, Tier 3, providers. This is a sign that as large providers get larger and big financial institutions or asset managers enter the industry, the competitive landscape will become more and more difficult for smaller ETP shops which try to take their shots at the ETF industry.
In Europe, the top 5 providers lost 0.6% of market share (mostly) to medium sized providers. Again this quarter, UBS, Source and Amundi continued to gather healthy cash inflows (€1.0 billion, €862 million and €507 million respectively).
Tier 1 providers in Asia Pacific lost the largest market share among Tier 1 providers across regions, yielding 3.1% (mostly) to medium sized providers. This is a testament about the dynamics governing the market in the eastern world which still remains more open to new competitors.
To request a copy of the report
Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
'Gold may hit $2 000 by year-end'
July 19, 2011--Gold will likely reach between $1 700 and $2 000 an ounce by year end, Nick Barisheff, president and CEO of investment company Bullion Management Group said on Thursday.
Gold pushed beyond the $1 600 an ounce this week amid debt-ceiling concerns in the US and continuing sovereign debt problems in the euro-zone.
Source: FIN24
Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?-IMF Working paper
July 19, 2011--Summary: This paper examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures - government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance - and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample.
Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group.
view IMF Working paper-Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?
Source: IMF
Global Commodity ETP Assets Rise 33% In 1H 2011, Trading Surges 95%
July 19, 2011--Global commodity ETP assets under management (AUM) rose 33% year-on-year to reach US$171bn at the end of 1H 2011, with on-exchange average monthly trading turnover nearly doubling year ago levels to hit US$167bn. These findings come from today's publication of ETF Securities' Global Commodity ETP Quarterly, Q2 2011, a comprehensive guide to investing in global commodity ETPs.
Key findings from ETF Securities' Global Commodity ETP Quarterly for Q2 2011 include:
Global commodity ETP assets stood at US$171bn at end of June 2011, up 33% on the year. Global commodity exchange traded product (ETP) 1 assets stood at US$171bn at the end of June 2011, 33% above year-ago levels as investors continue to increase weightings in the asset class. Assets are nearly triple end-2008 levels.
Source: Mondovisione
