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Gold ETPs enjoyed strong showing over May: BlackRock

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iShares by BlackRock has published its global ETP flows report for May 2023, with Laura Cooper, senior macro investment strategist for iShares EMEA at BlackRock, commenting: “ETP flows continued to rise throughout May, as headline flows into US and EMEA-listed ETPs grew. 

“Notably, gold ETP flows remained strong, having added USD4.3 billion since March. Demand was driven by investors looking to gold to help diversify portfolios, whilst the gold price remains elevated amid market volatility and both central bank and retail buying. There was also significant pick up in investment grade credit, while rates ETP inflows almost doubled from April to May.”

BlackRock writes that flows into global ETPs rose to USD77.3 billion in May, up from USD53.5 billion in April, with a pickup across asset classes. Headline flows into US and EMEA listed sustainable ETPs also increased to USD5.2 billion.

Equity flows came in at USD41.8 billion, up from April’s USD26.9 billion, while fixed income (FI) flows rose to USD33.1 billion. Commodity flows driven by buying in gold increased to USD1.8 billion.

The firm notes that US equity flows ticked up for a third straight month to USD22.1 billion the highest monthly level this year accounting for just over half of all equity flows, while rates (USD14.7 billion) led bond buying.

International investor interest in Europe and emerging market (EM) equity markets has been a key theme YTD, BlackRock notes. While Europe (–USD1.2 billion) turned negative in May, flows into US listed European equity ETPs remained positive, albeit at a lower level of USD0.4 billion. The USD9.9 billion of inflows into US listed European equity YTD far outpaces the USD3.9 billion to EMEA listed ETPs, and has proven sticky vs. history.

In EM, headline equity flows increased to USD13.1 billion: while the vast majority went into APAC listed ETPs (USD11.2 billion), this masks continued allocation to EMEA listed ETPs, with USD1.3 billion added in May, up from USD1.0 billion in April, the firm says.

International investors have favoured broader exposures this year and this trend continued into May. International interest in Japan has also continued to pick up, with a combined USD1.9 billion into EMEA and US listed Japan equity ETPs in May, building upon the USD1.4 billion added in April.

Inflows of USD1.9 billion into gold drove overall commodity buying in May, with the headline figure coming in at USD1.8 billion after outflows from broad market commodity exposures, BlackRock writes. Gold has now added USD4.3 billion since March: events in the banking sector, compounded by uncertainty over the US debt ceiling sparked renewed interest in the precious metal after a cumulative USD25.5 billion out from May 2022 to February 2023.

Silver flows have historically tracked gold, yet this hasn’t happened in 2023, the firm says, adding that silver saw buying in January February but turned negative when gold flows picked up, leading to a cumulative –USD0.2 billion out over the past three months. The last time silver and gold moved in opposite directions was August November 2021, with no clear catalyst for this dynamic.

A significant pickup in buying across rates and multisector ETPs drove FI flows higher in May, with rates inflows almost doubling from USD8.6 billion in April to USD14.7 billion in May, BlackRock writes.

Multisector ETPs, which tend to have exposure to the broadest FI indices, alongside other strategies, saw USD12.9 billion added, up from USD7.1 billion in April.

The USD5.2 billion into global investment grade (IG) ETPs in May was relatively evenly split between US (USD1.5 billion) and EMEA-listed ETPs (USD1.3 billion), in contrast to April where EMEA-listed flows accounted for 79 per cent of total IG flows, the firm says. Given the uptick in US-listed flows, the proportion of flows going into USDIG also increased, although there is still a sizeable amount of money going to EUR IG exposures –USD956 million in May, following USD1.9 billion in April. An up-in-quality approach was also evident in the USD1.7 billion added to EMEA-listed sustainable FI ETPs – the highest level since January, the firm says.

The preference for Europe has also carried through to high yield (HY). Despite outflows from global HY (-USD1.8 billion) in May, small inflows of USD0.2 billion into eurozone HY exposures marked three consecutive months of buying, in contrast to May USD outflows.

Sector flows in May were slightly skewed by rebalancing-related activity towards the end of the month, the firm writes. This meant that tech flows led globally in May (USD15.9 billion), but USD5.5 billion of this reversed on 1 June alone, moderating the overall allocations. Looking at flows on a weekly basis –which may be more instructive in this case –the tech sector has now seen six consecutive weeks of buying. It is decidedly the most popular sector globally YTD, as part of a broader defensive shift that has come through in sector flows.

Staying in defensives, flows into healthcare remained positive in May (USD1.0 billion) for a second consecutive month, with a higher proportion going into US healthcare MoM. This contrasted with cyclical outflows: May saw net sells of -USD0.9 billion from both industrials and materials, and a sixth consecutive outflow month for energy, while financials flows (-USD2.5 billion) turned negative for the first month in five.

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