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July brings calm to European ETP market


Total European exchange-traded products cash flows of EUR1bn point to a positive yet relatively calm week where equity investors seem to be pausing to take stock and on some occasions fine-tune their game.

The sector received positive equity flows of EUR650m in the week to 16 July, while precious metals flows came to a halt with only EUR128m flowing in, the research by Deutsche Bank shows.

Fixed income continued its positive flow trajectory with EUR184m of inflows over the week.

A closer look at equity flow allocations suggests a slight improvement in market temperature. This might be due to improved confidence or it could be down to the fact that July generally tends to be a quiet month due to holiday schedules.

Country (EUR324m) and regional (EUR244m) benchmarks started to receive inflows, while sector benchmarks saw elevated cash outflows (EUR250m). Leveraged, long and short benchmarks had an especially good week, recording EUR350m of inflows, a number that perhaps indicates market conditions that permit investors to form clear views.

Sovereign inflows (EUR254m) led fixed income ETP flows, while money market funds continued to experience outflows (EUR69m). Sovereign inflows 2010 year to date totalled EUR4.4bn, while money market outflows for the same period reached EUR1.3bn.

Gold investors also took a pause with only EUR32m of inflows in the past week. Broad agriculture indices (EUR39m) and crude oil (EUR35m) saw some inflows, while most of the other commodity sectors were flat.

Emerging markets was the flavour of the week, with three new products launches. Six other ETFs were cross listed.

Comstage launched two new ETFs tracking the Hong Kong equity market, while HSBC launched one new ETF tracking MSCI Brazil.

Lyxor made a strong push in the Spanish market by cross-listing nine ETFs on the Bolsas y Mercados Españoles. The cross-listings included four Stoxx 600 sector ETFs, two MSCI broad equity market ETFs, two non European real estate ETFs and one Aaa Euro government bond fund.

Consistent with the general July calm trading environment, average daily on exchange ETP turnover declined 2.8 per cent, maintaining its downward slope of the previous weeks, totalling EUR1.9bn.

Modest weekly equity cash flows and a slightly downward trending equity market contributed to the European ETP assets under management declining by 1.3 per cent to EUR193.7bn.

The equity ETP segment fell by 1.5 per cent on the back of a 1.5 per cent fall in the Euro Stoxx 50 over the week. Fixed income rose by 0.4 per cent, while commodities fell by 2.7 per cent driven by the 1.7 per cent fall in gold price.

European ETP AUM growth for 2010 YTD remains robust, registering at shy of 14 per cent.

Equity markets remained ambivalent over the week, with no real push in either direction. The Euro Stoxx 50 declined by 1.5 per cent, DAX fell by 0.4 per cent and FTSE 100 rose by 0.5 per cent.

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