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Europe Playing Catch Up

Oct 30, 2017

Europe Playing Catch Up ETFS Trade idea – ETFS EURO STOXX 50® ETF (ESTX) The European Central Bank’s (ECB) proactive approach is helping aid Europe’s economic recovery Lending growth is on the up The ECB wants a weaker euro which will support many of the multi-nationals in the EURO STOXX 50, who generate a majority of their revenue offshore ETFS EURO STOXX 50 ETF (ESTX) provides low cost access to European stocks without any UK exposure. This ETF was rated Recommended by Lonsec Whilst we focus on what Trump will tweet next, what new high the Dow will hit, or how long the Australian market can continue moving sideways, Europe has quietly been going about its business, continuing its recovery phase. This recovery has been aided by the ECB’s proactive approach and a stabilising geo-political environment. What should investors be looking at in Europe? What are the ECB doing? Last week on Thursday the ECB met market expectations for tapering its bond purchase program. Globally markets responded positively. For the day at close of markets on Thursday 26th October: o EURO STOXX 50 Index was up 1.3% o DAX was up 1.4% o Positive news from the ECB had a spill-over effect on the S&P 500 which was up 0.2% Show me the money Analysing Eurozone M3 data for September, lending growth is extending: o Lending to corporates rose to 2.5% y/y o Mortgage lending rose to 2.4% y/y o Consumer credit growth steady at 6.7% M1 (good indicator of transactions demand for money) in September rose to 9.7% y/y from 9.5% y/y in August Recent European reporting season Whilst the Australian reporting season was somewhat uneventful, the recent European season showed that the region is recovering strongly: Is Europe over or undervalued? The EURO STOXX 50 is still cheap when looking at valuations against other broad indexes Europe earnings also show that it has much greater catch-up potential The ECB wants a weaker euro The ECB’s concern about a rising euro will see it continue to adopt a dovish stance, as seen in last week’s policy announcement The ETFS Research team believe that any spikes higher in the euro are temporary and that the market has largely priced in tapering of the ECB’s bond purchasing program A weaker euro will support many of the multi-nationals in the EURO STOXX 50 that generate a majority of their revenue offshore Below chart shows a breakdown of the geographic revenue exposure of the EURO STOXX 50 and the S&P 500 Given the continued revival of Europe, the ETFS EURO STOXX 50 ETF (ESTX) is well positioned for investors for the following reasons: no inclusion of UK companies means fallout from Brexit negotiations is reduced the proportion of revenue generated offshore is close to 50% meaning a weaker euro could be a positive scenario for many of the constituent companies ESTX is the lowest cost Europe-focused ETF on the ASX with an MER of 0.35% p.a ESTX is domiciled in Australia so there are no W8-BEN tax forms for investors to complete and US Estate Tax is not applicable Recommended by Lonsec

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Weekly ETF Monitor for week ending 27 October 2017

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Oct 27, 2017

The S&P/ASX 200 ended last week flat after giving up earlier gains following the High Court's ruling on eligibility of MPs. The S&P 500 advanced 0.2%, with strong advances in the technology sector. The EURO STOXX 50 added 1.3% as the ECB announced an extension of its bond-buying programme, while in Japan the Nikkei 225 gained 2.6% following Abe's conclusive election victory. Japan-focused ETFs (IJP and UBJ) were amongst the top performers for the week returning over 4%. The Australian dollar dropped to its lowest levels since July, declining 1.8% to below US 77c. The euro dropped 1.5% on lower rate expectations. WTI crude gained 4.7% on concerns of OPEC supply cuts. Precious metals declined for the week in-line with US dollar strength, though gold ended the week strongly in response to political tensions in Spain. The Australian ETF market saw inflows of A$75m and outflows of A$126m from domestically domiciled ETFs last week. The largest inflows were into cash and fixed income funds (AAA, QPON and PLUS), while the majority of outflows were from SPDR S&P/ASX 200 Fund (STW).

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Weekly ETF Monitor for week ending 20 October 2017

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Oct 20, 2017

The S&P/ASX 200 gained 1.6% last week, trading above 5,900 for the first time since May. The S&P 500 added 0.9%, while the Nikkei 225 gained 1.4% ahead of Shinzo Abe's convincing election victory. ETFS Morningstar Global Technology ETF (TECH) was the top performing unleveraged ETF for the week, returning 2.5%. VanEck Vectors S&P/ASX MidCap ETF (MVE) was the top performing unleveraged domestic equity fund, returning 2.1%. The US dollar gained against most major currencies last week. The Australian dollar declined 0.9% to end the week at US 78.17c. The euro dropped 0.3% and the Japanese yen lost 1.5%. Commodities pulled back last week with gold down 1.8% and silver down 2.2%. Palladium declined 1.6%, but ETFS Physical Palladium (ETPMPD) continues to be the best performing fund on both a year-to-date and 12-month basis. The Australian ETF market saw inflows of A$72m and outflows of A$6m from domestically domiciled ETFs last week. The largest inflows were into a range of cash and fixed income funds (AAA, IAF, PLUS, BILL and QPON).

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Weekly ETF Monitor for week ending 13 October 2017

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Oct 13, 2017

The S&P/ASX 200 advanced strongly last week, adding 1.8%. Eurozone industrial production continued to exceed expectations, pushing the EURO STOXX 50 marginally higher despite some uncertainty from the Catalonian independence claim. The S&P 500 gained 0.2%, while the Nikkei 225 added 2.2% ahead of this week's election. The US dollar pulled back against most major currencies last week after the Fed Reserve's September minutes showed some divided opinions on monetary policy over the coming months. The Australian dollar climbed 1.8% to end the week at US 78.87c. The euro added by 0.8% and the Japanese yen gained 0.7%. Commodities also performed strongly last week with WTI crude up 4.4% and all four precious metals advancing. Palladium was the big mover gaining 7.4% for the week. BetaShares Crude Oil ETF (OOO) and ETFS Physical Palladium (ETPMPD) were the two best performing ETFs last week. The Australian ETF market saw inflows of A$147m and outflows of A$38m from domestically domiciled ETFs last week. The largest inflows were into SPDR S&P/ASX 200 Fund (STW), a range of cash and fixed income funds (AAA, QPON, FLOT, PLUS, IHHY and IHCB) and ETFS Physical Gold (GOLD).

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Weekly ETF Monitor for week ending 22 September 2017

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Sep 22, 2017

Monetary policy was in the spotlight last week, with the US Fed announcing plans to begin winding down it's balance sheet. The S&P 500 dropped on the news, but finished the week slightly up. Elsewhere, the EURO STOXX 50 added 0.7% on strong PMI figures in the lead up to the weekend's German election. The Nikkei 225 gained 1.9%. Domestically, the S&P/ASX 200 declined by 0.2%. Global sector plays (BNKS, FUEL and IXP) and US small caps (IJR and IRU) were the top performing ETFs for the week. The US dollar strengthened against most major currencies. The Australian dollar pulled back 0.5% to below US 80c. Precious metals retreated further, with gold down 1.7% and silver down 3.4%. Iron ore dropped by 11.9% on Chinese demand concerns. The Australian ETF market saw inflows of A$99m and outflows of A$13m from domestically domiciled ETFs last week. The largest inflows were into ETFS Physical Gold (GOLD) and iShares S&P/ASX 200 ETF (IOZ) as well as cash and floating rate income funds (AAA, QPON and FLOT). ETF Securities launched ETFS Global Core Infrastructure ETF (CORE).

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Weekly ETF Monitor for week ending 15 September 2017

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Sep 15, 2017

The S&P/ASX 200 added 0.4% last week as mining and resource stocks dragged on the local market. Offshore, global stocks hit new highs with the S&P 500 up 1.6%, the EURO STOXX 50 adding 2.0% and the Nikkei 225 up by 3.3% despite continued North Korean aggression. BetaShares WisdomTree Japan ETF (HJPN) was the top performing equity ETF for the week, returning 3.9%. The US dollar strengthened against most major currencies and US Treasury yields rose sharply. The Australian dollar pulled back 0.7% to US 80c, while the euro declined by a similar amount. The Japanese yen dropped 2.8% against the US dollar. Pound sterling gained 3.0% against the US dollar. Precious metals retreated last week, with gold down 2.0% and silver down 2.1%. WTI Crude added 5.1%, trading above US$50/bbl for the first time since July. The Australian ETF market saw inflows of A$76m and outflows of A$10m from domestically domiciled ETFs last week. The largest inflows were into cash and fixed income funds (PLUS and BILL) with a range of equity funds also attracting inflows. ETF Securities launched ETFS ROBO Global Robotics and Automation ETF (ROBO), Australia's first specialist robotics, automation and AI ETF.

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