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China and US compete for gold in ETF regional growth

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Deutsche Bank’s current global exchange-traded fund industry growth projection, published in January this year, is for asset growth between 15 and 20 per cent over 2012.



With China and the US competing head to head for Olympic medals in London, it seems that ETF industry regional growth for the first seven months of this year presents a similar picture.

The Asian ETF market has registered asset growth of 23.8 per cent this year and it has been leading the asset percentage growth tables. This strong growth is based on overall strong cash flow patterns throughout the year but it has been given a big lift by two new Chinese product launches that brought close to USD8bn of new flows to the Asian ETF industry over May 2012. The fifth month of 2012 registered flows that accounted for close to 65 per cent of the Asia region’s 2012 YTD new flows.

In terms of net new flows, the US ETF industry leads the charts, with USD87.9bn of new inflows YTD. It is no surprise that the US ETF industry generated the highest flows given that it is home to close to three quarters of global ETF assets. However, US ETF flows for the first seven months of 2012 present a new record. They are the highest absolute level of cash flows ever received by the US ETF industry over a comparable period. The level of flows underpins the US market’s strong capacity to draw new money across asset classes.

Close to 60 per cent of the US ETF market’s was received by equity ETFs (USD35.5bn) while fixed income ETFs received almost the remaining 40 per cent (USD29.2bn).

This is a very different picture from the Asian market, where equity ETFs received the overwhelming majority of new flows (92 per cent). Asia equity ETFs make over 90 per cent of the region’s total ETF assets. The US ETF market grew by 15.3 per cent in the first seven months of 2012.

Europe ranked firmly in the bronze medal position both with regards to new flows and asset growth. The European ETF industry registered USD9.9bn of new flows and 11.6 per cent asset growth for 2012 YTD. The region’s sovereign crisis has undoubtedly impacted equity trading patterns across the board. European cash equities turnover is down 28.2 per cent year over year for the first seven months of 2012.

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