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February ETP flows figures from iShares by BlackRock finds equities on top

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iShares by BlackRock’s report on February ETP flows finds that equities dominated, and emerging market equities set a new record.

The firm writes that USD109.5 billion was added to global ETPs in February, marginally up from the USD107.9 billion added in January, with the pickup largely coming from increased equity buying.

EM equity sets a record: equity flows rose from USD70.7 billion to USD85.6 billion, with an increase in buying across developed market (DM) and emerging market (EM) exposures, including a new record for the latter. Fixed income (FI) flows dropped from USD38.4 billion to USD21.4 billion and commodity selling continued, with a further USD3.7 billion out.

Quality in control: a quality bias continued to come through in precision equity flows: tech led sector flows, with USD8.1 billion added, and quality led factor flows (USD4.1 billion).

Rates ETPs had their largest inflow month since October, with USD9.3 billion added in February, spread across listing regions but largely due to US-listed flows. Among EMEA listed rates ETPs, short-duration buying dropped to the lowest level in four months (USD0.7 billion), while blended maturity flows picked up to USD0.8 billion. In contrast, inflows into US-listed rates showed demand for intermediate-term (USD4.0 billion) and long-term (USD2.7 billlion) exposures, in particular.

After three months of consistent inflows, culminating in the bumper USD14.6 billion into investment grade (IG) in January (partly due to tactical trading into ETFs vs. direct bonds), credit flows waned in February, with USD3.3 billion into IG and USD0.4 billion out of high yield (HY). Overall, the firm writew, EMEA-listed IG ETPs marked their first outflow month in four (-USD0.3  billion ) and EMEA-listed HY ETPs gathered USD0.5 billion (the fifth consecutive month of inflows); US-listed flows were a mirror image, with USD1.5 billion into IG and USD0.9 billion out of HY.

The pickup in equity flows came across exposures, with US equity flows rising to USD39.7 billion, EM flows at USD28.2 billion (surpassing the previous record set in January), and European equity flows notching their second inflow month in three, with USD1.9 billion added. The pickup in European equity was driven by buying in both US and EMEA-listed ETPs, with the USD0.9 billion of inflows into US-listed European equity representing the strongest month since February 2023 – when robust European equity sentiment was a key theme among investors.

Tech led sector flows again in February, with a further USD8.1 billion added, following on from the USD9.0 billion of inflows in January. February’s flows were boosted by USD4.3 billion in the last week of the month alone, amid strong sentiment towards the sector, partly due to broadly positive Q4 earnings reports.

A quality bias also came through in factor flows, with USD4.1 billion added over the course of the month, cementing quality as the most popular factor YTD (as was the case in 2023). Momentum has also come into focus, with USD1.4 billion added in February – its largest inflow month since October 2022, given its sectoral makeup (with a tilt towards tech in the US and financials in Europe). Value has also notched up a ninth consecutive month of inflows, with a further USD0.6 billion added in February – contrasting with appetite for cyclical sectors, of which only industrials gathered meaningful inflows (USD0.7 billion).

Commenting on the report, Laura Cooper, senior macro investment strategist for iShares EMEA at BlackRock says: “February ETP flows were characterised by increased equity buying, with allocations to emerging market equities setting a new record. We also saw a renewed rotation into rates ETP, with USD9.3 billion added in February, driven by sizeable demand for duration. As expectations for US rate cuts were pared back, the growing appeal of US fixed income saw investors being drawn into extending positions further out the curve.”

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