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Investors recovering interest in the equity market

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The US equity market continued its September’s winning streak into the first half of October, with the S&P 500 up by 1.0 per cent last week and 3.1 per cent month to date.

Similarly, gold recorded a 1.91 per cent increment for the last week and 4.6 per cent for the first half of the month.

US exchange-traded product flows have been consistent with the rally and have contributed with USD6.1bn and USD5.4bn of fresh money during the last and the previous week, respectively.

Deutsche Bank figures suggest that investors are recovering interest in the equity market in an attempt to leverage their returns. Equity ETPs received USD5.1bn in new money versus USD5.6bn in the previous week. As the risk/reward profiles of developed and emerging markets have moved closer, both large cap and emerging markets ETFs have become the two main drivers of the equity inflows surge, last week they recorded new flows of USD2.2bn and USD1.8bn, respectively.

With fixed income returns being squeezed by historical low rates and further concerns regarding the implications of a possible second round of quantitative easing, investors keep shifting positions towards sources of higher return. Fixed income ETPs recorded USD135m outflows, mainly driven by an exodus from sovereign ETFs (-USD235m). Nevertheless, other sectors such as corporate (USD83m) and sub-sovereign (USD110m) ETFs still appeal to investors and have received positive flows consistently during the previous weeks.

Commodities received healthy inflows of USD897m last week, with gold receiving inflows of USD655m versus USD511m outflows during the previous week.

There was one new listing in the first half of October. Van Eck Funds listed a China A-Shares focused ETF in the NYSE Arca. This fund (PEK) is the first of its kind in the US and, unlike other ETFs which track the China H-Shares market (Hong Kong listed), PEK will offer access to a broader Chinese market investing in stocks listed in mainland China exchanges.

On 6 October, Old Mutual Global Shares Trust liquidated all of its five US listed ETFs alluding that due to the US market condition, it was unlikely that their products would gain sufficient market share. At the time of liquidation the combined AUM of these funds were almost USD100m.

Overall, average daily turnover increased by 4.1 per cent and totalled USD64bn at the end of the week. Within the asset class level, equity ETPs recorded an increased of USD2.2bn or 3.9 per cent, while commodity and currency ETPs recorded a relatively significant weekly increase of 8.5 per cent and 11.6 per cent, respectively.

US ETPs AUM rose by 1.8 per cent reaching its higher level YTD, totalling USD929bn at the end of last week. This growth has been fueled by a rally in the equity and gold markets, accompanied by strong inflows – especially into the equity emerging markets.
 

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