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Weekly ETF Monitor for week ending 7 December 2018

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Dec 11, 2018

This week's highlights Global equities declined last week on growth expectations and spiralling U.S.-China trade tensions. The S&P 500 fell 4.6%, with financials being hit hardest; BetaShares Global Banks ETF (BNKS) fell 5.2% for the week. The EURO STOXX 50 dropped 3.6% as a key week in the Brexit process approaches. The Nikkei 225 fell 3.0%. Domestically, the S&P/ASX 200 ended up on positive territory, up 0.3%. Property funds (MVA and SLF) were the top domestic funds for the week. U.S. 10-year Treasury yields fell 14 basis points on lower growth expectations. Similarly Australian 10-year yields fell 15 basis points. The Australian dollar ended the week 1.3% lower at US72.08c. Pound sterling fell for a fourth consecutive week and approached its lowest levels since June 2017. Precious metals advanced, with gold up 2.4% to US$1,249/ounce. Palladium briefly topped gold as the most valuable precious metal and ETFS Physical Palladium (ETPMPD) is clearly the year's top performing ETF to date, returning 23.4% in 2018. Crude oil also gained, adding 3.3% following OPEC's agreement to cut production by more than originally anticipated. The Australian ETF market saw inflows of $120m into and outflows of $12m from domestically domiciled funds last week. The largest flows were into BetaShares Australia 200 ETF (A200) and a range of international equity funds (WDMF, NDQ and IHVV).

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Weekly ETF Monitor for week ending 30 November 2018

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Dec 03, 2018

This week's highlights U.S. equities rallied strongly last week on Fed comments that interest rates are approaching equilibrium and a truce in the trade dispute with China. The S&P 500 gained 4.9%, led higher by IT and healthcare stocks. ETFS Morningstar Global Technology ETF (TECH) was the top performing unleveraged ETF for the week, returning 6.5%. NDQ returned 5.4%, while global healthcare fund DRUG returned 5.0%. Elsewhere the EURO STOXX 50 added 1.1% and the Nikkei 225 gained 3.3%. Domestically, the S&P/ASX 200 fell by 0.9% with the biggest declines being in the mining sector. QRE and OZR were both amongst the poorest performers for the week. The Australian dollar ended the week 1.0% stronger at US73.06c. U.S. Treasury yields pulled back as rate hike expectations tapered. Crude oil halted its recent slide, gaining 1.0% for the week as expectations of an OPEC production cut firmed. Gold fell slightly to US$1,221/ounce, while platinum declined 5.4%. The broad Bloomberg Commodities Index gained 1.3%. The Australian ETF market saw inflows of $349m into and outflows of $101m from domestically domiciled funds last week. The largest flows were into and out of broad based domestic and international equity funds.

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Weekly ETF Monitor for week ending 23 November 2018

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Nov 26, 2018

This week's highlights The global equity correction continued last week. The S&P 500 fell 3.8% as big technology names sold off. Apple was one of the hardest hit, falling 11.0%. BetaShares NASDAQ 100 ETF (NDQ) returned -3.8% for the week. The global energy sector also saw big moves with BetaShares Global Energy Companies ETF (FUEL) falling 4.3%. Healthcare is now the top performing US sector in 2018. Australia outperformed with the S&P/ASX 200 down just 0.3%. Financials and real estate were the top sectors and three domestic property funds, SLF, VAP and MVA, were amongst the week's top performing ETFs. The U.S. dollar regained ground last week against most majors. The Australian dollar ended the week 1.4% lower at US72.33c. U.S. Treasury yields pulled back as grown concerns dampened rate hike expectations. Crude oil continued to fall, dropping a further 10.7%. BetaShares Crude Oil Index ETF (OOO) was the poorest performing ETF for the week. Gold was flat for the week, while palladium declined 4.8%. The broad Bloomberg Commodities Index fell 2.9%. The Australian ETF market saw inflows of $212m into and outflows of $73m from domestically domiciled funds last week. The largest inflows were into domestic equity (A200, QOZ and E20) and fixed income (CRED and QPON) ETFs. Outflows were from Taiwanese equities (ITW) and domestic cash (AAA).

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Weekly ETF Monitor for week ending 16 November 2018

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Nov 19, 2018

This week's highlights Cyclical stocks (technology, consumer discretionary and energy) led equity markets lower last week. The S&P 500 fell 1.6% and the VIX remained elevated following its October spike. The EURO STOXX 50 fell 1.5% as Brexit and Italy concerns continued to develop. In Asia, Japan's Nikkei 225 dropped 2.6%, while China's Shanghai Composite provided some positive news, gaining 3.1% on strong manufacturing data. CETF was amongst the top performing ETFs for the week. Domestically the S&P/ASX 200 fell 3.2% as the overweight financials and materials sectors pulled-back. The U.S. dollar fell broadly last week as uncertainty around a December hike increased. The Australian dollar ended the week 1.5% stronger at US73.32c. Gold rallied last week, gaining 1.1% to US$1,223/troy ounce. Palladium gained 5.4% on growing auto demand supply concerns. ETFS Physical Palladium (ETPMPD) was the top performing unleveraged fund for the week. WTI crude fell 6.2% to its lowest level since last December and BetaShares Crude Oil Index ETF (OOO) was the poorest performing unleveraged ETF for the week. The Australian ETF market saw inflows of $138m into and outflows of just $7m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (IOZ, OZF and FAIR).

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Weekly ETF Monitor for week ending 9 November 2018

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Nov 13, 2018

The week's highlights Global equity markets rallied last week in the wake of U.S. midterm elections. The S&P 500 gained 2.1% on the expectation that major policy changes would be slowed by the divided government. The EURO STOXX 50 added 0.5%, while the Nikkei 225 was flat. Domestically the S&P/ASX 200 added 1.2%, led higher by the big four banks, which posted an average gain of 4.3% for the week. Bank and property ETFs (MVB and MVA) were amongst the week's best performers. The Fed kept U.S. rates unchanged, while firming expectations of a December hike. Short-term yields rose and longer-dated yields remained near recent highs. The Australian dollar ended the week stronger at US72.26c. Commodities declined with gold down 1.9% and silver down 3.8%. WTI crude fell 4.7% to its lowest level since February and BetaShares Crude Oil Index ETF (OOO) was the poorest performing ETF for the week. The Australian ETF market saw inflows of $116m into and outflows of $23m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (IOZ and MVW), while the largest outflows were from domestic small caps (ISO) and U.S. dollar (ZUSD). ETF Securities launched Australia's first biotechnology ETF; ETFS S&P Biotech ETF (CURE).

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Trade Idea: Palladium on the move?

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Jun 22, 2017

Palladium on the move? ETFS Physical Palladium (ETPMPD) In this week’s ETF Securities trade idea we examine the drivers behind palladium’s recent price run (up 30% YTD) and look at whether it has further to go. We identify four key points to consider: Palladium’s major use is in autocatalysts used in emission reduction equipment in gasoline cars and its main suppliers are South Africa and Russia Demand for gasoline vehicles is on the rise in key markets such as China and India and diesel demand is declining globally Electric vehicle demand is yet to reach sufficient scale to impact palladium prices significantly Speculative positioning in palladium is high, but not excessive Palladium is a metal used mainly in pollution abatement equipment. Approximately 80% of palladium is used in autocatalysts to reduce the emission of carbon dioxide and nitrogen oxides. There are higher loadings of palladium in gasoline cars than there are in diesel cars. Diesel cars have higher loadings of platinum (which performs a similar role to palladium, but its more suited to diesel engines which operate at lower temperatures). About 40% of platinum demand comes from autocatalysts. About 40% of mine supply of palladium comes from South Africa and another 40% comes from Russia. Historically, the Russian government had been selling its stockpiles of the metal, but there has not been any metal from this source since 2013. There is no transparent data on whether the Russian government has more stocks to sell. Palladium has appreciated by 30.0% in US dollar terms in 2017-to-date and, as shown in Figure 1, is approaching parity with platinum for the first time since 2002. Consumer preferences have tilted towards gasoline vehicles away from diesel, which accounts for much of the rise in demand for palladium relative to platinum. The automobile growth in markets like China, India and other emerging markets is a key area of strength. These are generally gasoline markets. These countries are also tightening emission standards which will increase the loading requirements of palladium. Established diesel markets like Europe are not seeing automobile growth on the same scale and regulatory fall-out from the emissions scandal and technological advancements have further tilted demand away from diesel. Electric vehicles (EVs) are growing rapidly from a small base. While electric vehicles account for less than 1% of global sales today, consensus estimates that it will rise to 4% by 2025. Most EVs do not contain palladium and so the growth of this type of vehicle will reduce a source of demand. We don’t think that the growth of EVs will materially change the supply-demand balance for palladium in the next couple of years, but will do as the market continues to grow. Speculative positioning in the futures market is elevated, as shown in Figure 2. Net longs are above their 5 year historic average but are still well below 2013-2014 levels when concerns about mine supply were aggravated by strikes in South Africa. Supply is subject to abrupt changes. Mine closures due to strike activity, embargoes of exports from certain countries and recycling dependency on other metals are some of the examples of factors that cause supply disruptions. While changes in demand can be quite surprising, as we have seen with the rotation toward palladium (gasoline engines) from platinum (diesel engines) in light of the emission scandal, generally changes in demand are more gradual. Investors wishing to add palladium exposure to their portfolios may consider using ETFS Physical Palladium (ASX Code: ETPMPD), the only ETP in Australia providing investors with physical exposure to the metal. ETPMPD offers holders a direct entitlement to palladium vaulted at HSBC in Switzerland with a management fee of 0.49% per annum.

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Trade Idea: Silver lining investment theme

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Jun 07, 2017

Silver lining investment theme Trade idea – ETFS Physical Silver ETF (ETPMAG) Gold vs silver ratio – indicates that silver is undervalued o Has averaged 62.63 since 1980 (as of 24 May 2017) o Currently widened to 73.49 (as of 24 May 2017) o 1x standard deviation above the long term average (as of 22 May 2017) Positive economics - a combination of higher inflation, a weakening US dollar (in first half of 2017) and improving manufacturing growth is likely to see silver prices trading higher. Is silver trading below fair value? Historically the ratio difference between gold and silver has been an interesting investment indicator of market direction. The gold vs silver ratio graph below identifies a potential trading theme. The graph indicates that when the ratio falls below the historic average line it could show gold as being below fair value relative to silver. On the reverse, when the ratio trades above the historical ratio average, like it is now, silver could be trading below fair value relative to gold. Positive price movements The Global Manufacturing Purchasing Managers Index (“PMI”) is sitting at a current high of 54.4, previously unseen since March 2011. In our view, the high PMI may indicate a potential increase in manufacturing activity and therefore a further potential positive move for the silver price in 2017. However, it should be noted that if we saw a global slowdown in manufacturing or a hawkish view from the US FED, this could potentially have a negative impact on the current price of silver and impact the gold vs silver ratio trading theme. Increasing demand Silver has a wide and growing range of uses globally, which could help further stimulate demand and create a positive move in the silver price; examples of silver’s growing uses include printed circuit board manufacturing, healthcare and the production of solar panels. ETF Securities research team give silver a 2017 fair value level of US$21/oz – for further information visit the ETF Securities Research Blog.

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