iShares by BlackRock reports that USD98.3 billion was added to global ETPs in June – the highest inflow month in 2023, up from USD78.0 billion in May. This takes H1 ETP flows to USD375.9 billion, versus USD301.4 billion over the same period last year.
A strong H1: over H1, equity flows (USD209.5 billion) outpaced fixed income (FI, USD165.4 billion), but notably, it was a record half for flows into EMEA-listed FI ETPs, BlackRock says.
Mixed picture: in June, equity flows hit USD75.8B, while FI buying moderated slightly to USD26.5B, and commodity flows flipped into negative territory (-USD5.1B).
June ETP flows pointed to a rotation out of European equities and increasing conviction in US equities – an acceleration of the trend we’ve seen emerge over the past six weeks, the firm says. US equity flows totalled USD45.2 billion in the largest inflow month for the exposure since October 2022. Meanwhile, European equity outflows hit -USD4.6 billion – the highest monthly net sell since August 2022.
For the first time this year, international investors meaningfully sold Europe, BlackRock writes, with outflows from US-listed European equity ETPs accounting for 48 per cent of total European equity outflows in June. So far this year, international investor flows into European equities have been stickier versus history.
As is usually the case with US equity ETP flows, the vast majority went into US-listed exposures (USD42.4 billion), but EMEA-listed US equity flows also picked up to USD2.3 billion – the largest inflow month since March.
Headline commodity outflows of -USD5.1 billion in June were led by gold (-USD3.8 billion), marking the largest month of selling for the precious metal since September 2022. This has unwound much of the USD4.2 billion that was added between March and April, with outflows fairly evenly split between US- and EMEA-listed ETPs.
Broad market commodity exposures also registered a net sell (-USD0.8 billion), marking a fourth consecutive outflow month and the 13th of the past 14 (a streak interrupted only by February 2023, which saw USD0.1 billion of inflows).
June marked the first time this year that emerging market debt (EMD) flows have been positive across all three major listing regions (EMEA, APAC and the US). EMD ETPs recorded global net inflows of USD2.6 billion in June – the second-highest inflow month this year.
APAC-listed flows into EMD have been relatively consistent across 2023 so far, while EMEA-listed flows have seen two consecutive months of inflows, and US-listed flows turned positive in June for only the third time this year.
Within EMEA-listed EMD ETPs, a clear preference for local currency exposures has come through over H1 2023: we’ve seen USD1.6 billion added to local currency products, versus outflows of -USD0.7 billion from their hard currency counterparts. EMEA-listed local currency EMD has seen inflows for seven out of the past eight months, following a broad lack of allocation in 2020 and 2021, and flat flows in 2022.
BlackRock writes that taking stock of sector flows over Q2, tech saw its strongest quarter since Q1 2022, with USD11.3 billion added, while healthcare flows rebounded to USD5.0 billion in Q2. This contrasts with Q1, when flows went into tech at the expense of healthcare, the firm says. The defensive shift in Q2 was clear and came alongside reduced flows into financials (USD0.6 billion) and industrials (USD0.7 billion), as well as outflows from materials (-USD1.6 billion).
Given market leadership so far this year, much focus has been on whether US tech has been stretched, the firm writes. Looking at global ETP flow data, US tech sector flows have accounted for 33 per cent of total tech flows YTD, and 7 per cent of overall US equity flows YTD. By these metrics – acknowledging that positioning goes beyond ETP flows – US tech looks far from stretched, in our view, the firm says.
