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BlackRock reports worst equity week but sees gold inflows

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BlackRock’s Global ETP flows report for February 2020 finds that the last week of February ranked as the worst week for equity outflows since records began in 2011, with investors selling USD31.5 billion.

BlackRock’s Global ETP flows report for February 2020 finds that the last week of February ranked as the worst week for equity outflows since records began in 2011, with investors selling USD31.5 billion.

BlackRock writes that February started as a strong month for flows, with investors adding USD35.6 billion in the first three weeks, before coronavirus fears reduced overall flows into equity ETPs to only USD4.1 billion in February, down from the USD37 billion added in January.

The firm reports that most of the selling occurred in US equity ETPs, with investors selling USD21.7 billion of the exposure in the last week of the month. “This marked the first outflow week for US equities this year, and the third-biggest outflow week on record. Despite selling late in the month, February remained a net inflow month for US equities (+USD0.7 billion). In contrast, emerging market (EM) equities registered outflows of USD8.1 billion.”

Longer-term trends have continued to play a role in flows, despite market volatility, with sustainable ETPs gathering USD5.7 billion of inflows in February, according to BlackRock. This continues a strong flow trend, with net inflows into sustainable ETPs in every week of this year, despite broad equity outflows.

Fixed income ETP flows fared much better in February, BlackRock writes, with inflows of +USD17.1 billion. However, like equities, investors sold the exposure heavily in the last week of the month (-USD6.2 billion) – the second worst week for outflows since March 2014, when USD8.5 billion exited the exposure.

ETPs were the biggest beneficiary for flows in February, gathering USD10.5 billion – more than double the amount gathered in January (USD4.4 billion).

BlackRock writes that sentiment towards credit dampened in February, with monthly outflows from HY ETPs hitting a new record (-USD6.2 billion). This was the first net outflow month for the exposure since August 2019, with selling out of EMEA and US-listed HY ETPs. Investment grade (IG) continued to gather inflows, with investors buying USD2.8 billion of the exposure globally, down from USD4 billion in January.

BlackRock writes that beneath the surface, outflows of USD0.2 billion from EMEA-listed IG ETPs contrasted with inflows of USD2.1 billion into US-listed counterparts, with FI ETPs functioning as an effective liquidity tool amid heightened volatility.

The firm also reports that emerging market debt (EMD) outflows were skewed towards local currency (LC) ETPs, with -USD0.4 billion compared to -USD0.3 billion from hard currency EMD in February.

Turning to commodities, BlackRock saw commodity ETP flows increase from USD5.1 billion in January to USD6.1 billion in February. The firm writes that year-to-date, commodity ETPs have captured USD11.2 billion, which is already 62 per cent of the total inflows into the exposure in 2019 (USD18 billion).

The majority of the February inflows were into gold ETPs (+USD3.7 billion). Investors have continued to favour the commodity for diversification properties amid market volatility as well as a lower-for-longer interest rate environment. So far this year, the precious metal has gained USD6.9 billion inflows, BlackRock writes, with seven consecutive weeks of inflows since mid-January.

“Despite increased interest in safe havens, silver ETPs gained negligible inflows in February.”

Crude oil ETPs also gained USD2.2 billion of inflows in February, continuing the trend of positive flows from January, when investors added USD0.9 billion to the commodity. While commodities are broadly viewed as a diversification tool, investors sold USD0.1 billion of broad market commodity ETPs in February, preferring to allocate to gold ETPs for diversification, BlackRock writes.

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