Jun 04, 2019
This week's highlights Trump’s tariff threats returned to centre stage last week hitting equity markets across the globe, while speculation mounted on potential activity from the RBA, Federal Reserve and ECB in coming weeks. Defensive sectors such as energy, consumer staples and utilities underperformed, with ETFs such as ZYUS, MOAT, VVLU and QUS all amongst the poorest performers for the week. Emerging markets still managed to post gains, with VGE, EMKT, IEM and FEMX all returning at least 1.7%. Precious metals benefited from the risk-off sentiment with ETFS Physical Gold (GOLD) returning 0.8% for the week and gold mining funds (MNRS and GDX) topping the performance tables for long-only equities. Crude oil dropped substantially, with OOO down 8.7% for the week. Total flows into domestically domiciled ETFs were $120m, while outflows totalled $60m. The biggest inflows were into domestic fixed income, cash and hybrid ETFs (IAF, AAA and HBRD), while the biggest outflows for the week were from inflation-linked bond (ILB) and emerging market (IEM) ETFs. AAA was the most traded fund last week, while QPON saw above average volumes. STW saw a substantial reduction in trading volume. ETFS Physical Precious Metals Basket (ETPMPM) returned 0.9% for the week and is up 12.6% over the past 12 months. It provides diversified exposure to the four major precious metals and their different supply and demand drivers. Its current allocation is 50% gold, 25% palladium, 17% platinum and 8% silver.
May 28, 2019
This week's highlights Aussie sectors, financials and resources soared last week off the back of a confidence boost from the LNPs win in the federal election. Financials also received a boost from APRAs proposal to remove the survivability buffer on home loans. Globally, markets were impacted by increasing trade war tensions between the U.S. and China as well as added uncertainty from May’s resignation. Unsurprisingly, VanEck Vectors Australian Banks ETF (MVB) and BetaShares S&P/ASX 200 Financials Sector ETF (QFN) were the best performers over the week, with MVB returning 6.9% and QFN 6.1%. The worst performers were BetaShares Crude Oil Index ETF - Ccy Hedged (OOO) down 6.8%, BetaShares Asia Technology Tigers ETF (ASIA) down 5.1% and BetaShares Global Robotics and Artificial Intelligence ETF (RBTZ) down 4.5%. The top flows for the week were seen by BetaShares Australian High Interest Cash ETF (AAA) and SPDR S&P/ASX 200 Fund (STW). Closely followed by BetaShares S&P/ASX 200 Financials Sector ETF (QFN) and BetaShares Australia 200 ETF (A200). Net inflows for Australian ETFs were a significant $313 Million. Looking longer term at performance over twelve months, ETFS Physical Palladium (ETPMPD) remains the best performer up 48.8% and VanEck Vectors Australian Property ETF (MVA) is up 28.1%. The worst performers are exchange listed hedge funds, with BetaShares Strong Australian Dollar Hedge Fund (AUDS) down 21.3% and BetaShares Australian Equities Strong Bear (BBOZ) down 24%.
May 21, 2019
This week's highlights Resource sector ETFs (MVR, OZR and QRE) were the top performers for the week as iron ore prices rallied to 2-year highs on China demand and global supply concerns. Market positioning ahead of the Australian election saw domestic financial sector ETFs (MVB, QFN and OZF) underperform last week. Asia-focused ETFs were also hit by continuing U.S.-China trade concerns, with ITW, ASIA, IKO, IAA and CETF all amongst the worst performers. Total flows into domestically domiciled ETFs were $100m, while outflows totalled $48m. The biggest inflows were into domestic cash and fixed-income ETFs (AAA, IAF, RCB and PLUS). BetaShares Australian Equities Strong Bear ETF (BBOZ) also saw inflows ahead of the election. The bulk of outflows for the week were from SPDR S&P/ASX 200 ETF (ETF). STW and AAA were the most traded funds last week, while Vanguard Australian Property Securities Index ETF (VAP) saw above average volumes. ETFS EURO STOXX 50 ETF (ESTX) posted a strong 3.0% return for the week and has now returned 15.9% year-to-date as the European economy continues to show evidence of growth having bottomed-out in early 2019 and optimism returning.
May 14, 2019
This week's highlights Global equity markets fell substantially last week as U.S. and China trade tensions escalated. Asia-focused ETFs were the hardest hit. The 10 worst performers for the week all included substantial Asian equity exposure, including iShares China Large-Cap (IZZ), VanEck Vectors ChinaAMC A-Share ETF (CETF) and iShares MSCI South Korea Capped ETF (IKO). Precious metals benefited from the risk-off sentiment with ETFS Physical Silver (ETPMAG) returning 1.3% for the week and gold funds (QAU, GOLD and PMGOLD) all amongst the top performers. Platinum also rallied. Domestic equities fared better, with resource sector (MVR) and property (MVA) funds posting positive returns for the week. Total flows into domestically domiciled ETFs were $83m, while outflows totalled $25m. The biggest inflows were into domestic equity ETFs (MVW and FAIR) and fixed income ETFs (AAA, CRED, HBRD and QPON). The biggest outflows for the week were from BetaShares Australia 200 ETF (A200) and international equity funds including IEU, IJH, FEMX and BNKS. STW and AAA were the most traded funds last week, while Magellan Global Equities Fund (MGE) saw above average volumes. ETFS Global Core Infrastructure ETF (CORE) posted a marginally positive return for the week and has now returned 8.8% year-to-date. It’s positive performance last week was despite a 30% allocation to Asia, demonstrating the important role of infrastructure assets in a portfolio and their ability to provide stability and aid diversification.
May 07, 2019
This week's highlights The best performers over the week were iShares MSCI Taiwan ETF (ITW) up 2.1% and UBS IQ MSCI Asia APREX 50 Ethical ETF (UBP) up 2%. The worst performers were dominated by miners, physical commodities and property. ETFS Physical Palladium ETF (ETPMPD) and BetaShares Global Gold Miners ETF (Hedged) (MNRS) were both down 4.7%. The SPDR S&P/ASX 200 Listed Property Fund (SLF) and VanEck Vectors Australian Property ETF (MVA) were both down -4.2%. Over twelve months ETFS Physical Palladium ETF (ETPMPD) remains the best performer with a return of 48.9%. ETFs tracking Morningstar’s moat focused index methodologies have also performed well. VanEck Vectors Morningstar Wide Moat ETF (MOAT) has returned 29.7% and ETFS Morningstar Global Technology ETF (TECH) is up 29.1%. The market saw inflows of $116 Million over the week and outflows of $98 Million. The best flows for the week were seen by Australian based ETF offerings including, VanEck Vectors Australian Equal Weight ETF (MVW), BetaShares Australian High Interest Cash ETF (AAA) and BetaShares Australian Investment Grade Corporate Bond ETF (CRED). The biggest outflows were across BetaShares U.S. Dollar ETF (USD) and ETFS Physical Gold (GOLD). Looking closer at weekly, year to date and 12 month turnover. Australian focused strategies STW, VAS and AAA hold the top three rankings.
Jan 22, 2018
How the Future Present series fits your portfolio Trade idea – ETF Securities Future Present series i. ETFS Morningstar Global Technology ETF (TECH) ii. ETFS ROBO Global Robotics and Automation ETF (ROBO) Key Takeaways: Technology was the top performing sector in 2017, returning 39% for the calendar year and contributing 25% of the total global equity market return(1). The pace of innovation continues to grow and adoption of new technologies in fields such as robotics and AI is quickly spreading across many industries. Adding funds like TECH and ROBO to an otherwise diversified portfolio offers investors unique opportunities to capture any future growth in this sector, while also reducing overall portfolio risk. (1) Source: Bloomberg data as at 18 January 2017. Information technology companies contributed 5.73% to the total return of 23.06% of the MSCI World Index in 2017. Future Proofing Portfolios Investors looking to future-proof their portfolios in 2018 should consider the opportunities that are presented by investing in new technology and innovation. Fields such as robotics, automation and artificial intelligence (RAII), in particular, are forecast to grow massively in the coming years and impact almost every industry by providing key enabling technologies and new applications for existing technologies. Investments in technology have traditionally been viewed as high return/high risk, however in recent years the established players in the technology world have become highly cash generative and broadly entrenched in our everyday lives. This has given many technology companies defensive, counter-cyclical characteristics that are traditionally more associated with utilities and real estate investments and has changed the way many investors look at the technology sector. ETF Securities Future Present Range The Future Present range of ETFs allows investors to combine well-established technology firms with strong competitive advantages, using TECH, with highly innovative firms from the exciting world of RAII, using ROBO. The below study explores the impact of adding the Future Present range to a simple, diversified ETF portfolio consisting of Australian equities, international equities, fixed income, gold and property. Hypothetical portfolio allocations are detailed in Charts 1 and 2 below: Over the four years of available history, adding a 10% allocation to the Future Present range (5% each to TECH and ROBO), while keeping the allocation to equities constant, not only improves the overall total return by 0.84% per annum, but also reduces the portfolio volatility by 0.95%2. Charts 3 to 6, below, show the risk return characteristics of the two portfolios as well as each of the constituents over 1, 2, 3 and 4 years. Benefits to Your Portfolio Apparent from the four charts below is the strong historical performance of the Future Present ETFs, with the two funds ranking first and second on the basis of returns across all tenors. With regards to volatility or risk, as measured by standard deviation, TECH and ROBO are at the higher end, though not substantially more volatile than either the Australian or international equity ETFs or gold. In all four cases, however, diversification benefits are seen in that adding above average risk investments lowers the overall portfolio risk in all cases, providing investors with better risk/return profiles. This is particularly true for Australian investors with high portfolio allocations to the domestic market, which is very underweight the technology sector. Source: Morningstar Direct as at 31 December 2017. Benchmark index returns are used as a proxy for TECH and ROBO due to insufficient fund history. Returns in AUD. Past performance is not an indicator of future performance. These graphs illustrate the trade-off between risk (standard deviation or volatility around the mean) and reward (expected or average return). The ideal position is within the upper left quadrant of the graphs. Placement here indicates that the portfolio returned more than the risk-free benchmark (typically the yield on high quality government bonds) with lower volatility. The bottom right corner is the least desirable, since this represents highest risk with lowest return
Jan 09, 2018
ETFS Trade idea – The Rise and Rise of Technology Technology driven advances and the pace of innovation are the defining mega trend of our era. Developments in fields such as robotics and automation are changing many industries and are having an impact on the way we work and live. Our Future Present range of exchange traded funds offers simple and intelligent ways to bring your portfolio into the 21st century by capturing growth in companies at the forefront of the technology revolution. The rise and rise of technology It has become something of a cliché, but technology really is changing the way we live and work. On buses and trains, for example, half of the passengers are likely glued to smartphones or tablets. Technological developments are certainly not confined to telecommunications; in fact, new technologies are heralding enormous changes in a very wide range of industries globally. And, in some cases, technological advances are creating entire new industries whose participants are enjoying stellar growth rates. These powerful trends are interesting from an investment perspective. After all, the premise of equity investing suggests investors allocate capital towards companies that can generate and maintain strong growth rates, which are most likely to generate favourable long-term returns for shareholders. This philosophy is a hallmark of thematic investing, whereby investors seek to benefit from exposure to a particular trend or theme. Thematic funds can be additionally appealing to investors as their performance is often uncorrelated with economic cycles and other forces that drive mainstream equity and bond markets. Accessing pioneering companies with the greatest growth potential can be easier said than done. Small and mid-cap companies at the cutting edge of innovation in emerging industry sectors are typically not well represented in traditional market cap weighted indices. Constituents of the S&P/ASX 200 Index, for example, are more mature large-cap companies, often with more modest growth rates. Accordingly, investors might be missing out on some of the brightest current investment opportunities, even if their portfolio is heavily weighted towards equities. Similarly, investors who focus primarily on the domestic market in Australia are not only missing out on the benefits of international diversification, but are likely to also be overweight sectors such as Financials and Materials. Significantly, they are also likely to be very underweight sectors such as Information Technology and Heath Care, which are major sources of growth and innovation. In recognition of this – and reflecting our desire to offer investors fresh, innovative and value-adding investment options from across the globe – ETF Securities has launched the Future Present range. This range of funds enables investors to access some of the most appealing investment niches currently available, conveniently and cost-effectively through an exchange traded fund (ETF) vehicle. Accessing a new world of investment opportunities The Future Present range has been designed to track the growth of new and innovative sectors that have historically been challenging for investors to access. Investing in the Future Present range of funds enables investors to participate in the growth arising from long-term structural shifts that are underway in various industries. The Future Present range was launched in 2017 with the only ETF in Australia offering exposure to the global technology sector – ETFS Morningstar Global Technology ETF (ASX code: TECH). Technology has been a major source of global growth in recent years. Since 1995, earnings across the technology sector have increased more than 500%, nearly double the wider market. This translates into an annual compounded growth rate of 8.5% per annum compared to 5% for the market. In 2017 technology was clearly the leading performing sector, averaging a total return of close to 40% on a market capitalization-weighted basis(1). In designing TECH, ETF Securities partnered with Morningstar, whose expertise as a leader in equity research provides insight used to identify the leading technology companies across the globe, based on rigorous analysis of the strength and sustainability of their competitive advantages. Furthermore Morningstar’s valuation models ensure that only firms trading at attractive valuations relative to peers are selected for the fund. Whilst mega-caps such as Apple, Google, Facebook and Amazon dominate, there is innovation and value to be found across the sector. From artificial intelligence to cyber-security, e-commerce and cloud infrastructure technology firms are growing and diversifying in many different directions. As such, companies are equally weighted within the fund to capture growth in small- and mid-cap companies that emerge as leading players in their field. The Future Present range has since expanded to include Australia’s first robotics, automation and artificial intelligence ETF – ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO). Companies are increasingly investing in automation as they seek to improve productivity; reducing production costs and, in turn, increasing profitability. Already generating more than $200 billion annually, sales in the robotics and automation sectors are tipped to increase more than five-fold over the next decade. (2) Currently, more than two thirds of industrial robots are employed in the automotive, electronics and metal industries(3) , but their use is likely to become more widespread as artificial intelligence systems develop further. Improvements in image and voice recognition, for example, as well as increasing usability of machine vision technology will enable robots to perform ever more complex tasks, widening their application and seeing them penetrate other industries. For ROBO, ETF Securities has partnered with ROBO Global, pioneers in robotics and automation investing and the developers of the benchmark industry classification system for the sector. ROBO Global’s expertise lies in their ability to identify companies that are best-placed to benefit from the structural changes underway. Which have competitive advantages that are likely to persist through time? Which are most profitable and likely to generate the strongest long-term returns for shareholders? Benefiting from ETF Securities’ heritage as Australia’s second oldest provider of exchange traded products, combined with the specialist expertise of our research partners, the Future Present range provides investors with a unique opportunity to invest in mega trends that are occurring all around us. We look forward to expanding the Future Present product range in 2018 and beyond. (1) Source: Bloomberg data as at 11 January 2018. (2) Business Insider Intelligence, Cyber Security Report, Apr 2016 (3) Source: International Federation of Robotics 2016
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
Aug 22, 2017
ETFS S&P/ASX 300 High Yield Plus ETF (ZYAU) In this week’s ETF Securities trade idea we look at dividend yield strategies and how they can be used in different ways depending on the investor's goals. Dividend strategies can be implemented in different ways to achieve different goals, which have their own pros and cons. Beware of dividend traps, chasing yield may lead to poor investment choices. Capital growth versus income generation – don’t sacrifice one for the other.
Aug 09, 2017
Is AUD/USD risk on the downside? ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) Key Teakeaways: The AUD/USD exchange rate is currently close to 2 year highs, at just below US 80c. US rate expectations pulled back in July as political developments have cast uncertainty over the pace of US reforms and growth. Investors with a view that the USD is undervalued or the AUD is overvalued can play a reversal via ZUSD, which is the most cost effective way to access direct US dollar exposure with an ETF. A declining USD has been the key theme in foreign exchange markets this year. The AUD has gained more than 8% from its mid-May lows, while the US Dollar Index (DXY), a measure of the value of the USD against a collection of major world currencies, has dropped nearly 7% over the same period. As shown in Figure 1 the recent appreciation of the AUD has been particularly steep, with the currency peaking at US 80.66c in late July, while the DXY has been in a downward trend for most of 2017, falling over 10% from its peak in the final days of 2016. Chaotic administration weighing on the US dollar. With the Russia investigation, continual changes in key personnel and failures to negotiate Congress, the Trump administration is failing to meet the lofty expectations set by the market last November. Whilst the Fed is now considered likely to raise rates only once more this year, the US economy is generally in good health. US 10 year treasury yields have fallen by just over 10 basis points since the start of July, suggesting that the long-term monetary policy outlook is relatively unchanged. With temporary factors and uncertainty being the main drivers of the lower dollar, a swift reversal is a possible scenario if confidence is restored. Last Friday’s US employment numbers, which exceeded analyst expectations, were an example, with the DXY jumping 0.75% almost immediately. RBA talking AUD down. The strength of the AUD has in part been a result of a shift in the expected direction of the RBA’s next rate move. However, the RBA last week noted that the higher currency is a concern for growth and cut its estimates for 2017 GDP growth by 0.5%. Further validation of a slowdown could quickly shift AUD sentiment to a bearish stance. What does this mean for investors? Investors wishing to express a bullish USD/bearish AUD view may consider the ETFS Physical US Dollar ETF (ZUSD) . ZUSD offers exposure to an appreciation of the USD against the AUD with a management fee of 0.30% per annum, making it the most cost effective ETF offering this exposure in Australia.