Dec 17, 2019
This week's highlights Global and domestic property fell last week with six of the bottom ten performers all providing exposure to property. MVA, VAP and SLF all posted negative returns. Asia, emerging markets and some precious metals had a strong week on the back of positive trade talks. UBS IQ MSCI Asia APREX 50 Ethical ETF (UBP) was up 4.7% and ETFS Physical Palladium (ETPMPD) up 4.6% as the metal scaled to new highs, falling just short of US$2,000/oz. Flows for the week consisted of $303 Million of inflows and $8 Million of outflows. Majority of inflows were to IOZ, to the tune of $80 Million. Hybrid and international and domestic equity ETFs also saw a good proportion of inflows. IOZ, VAS, STW and AAA were the top traded ETFs for the week keeping up the trend for the year. ETFS Physical Palladium (ETPMPD) year-to-date has returned 59.1%. The precious metal has a wide range of industrial and commercial uses in areas such as dentistry, medical equipment, jewellery and electronics. But its biggest demand comes from the automotive industry where the metal is used in catalytic converters to control the emission of harmful exhaust gasses.
Dec 10, 2019
This week's highlights Domestic equities declined last week with the S&P/ASX 200 posting its worst week since early October. Domestic ETFs VHY, SELF, IHD, MVW, RDV, QOZ and SYI were all amongst the week’s poorest performers. The top equity performers were China funds CNEW and CETF along with Japan fund IJP. Bearish equity funds (BBOZ and BEAR) and Australian dollar fund AUDS also posted strong gains. Precious metals pulled-back last week, with the exception of palladium. Crude oil rallied sharply. OOO returned 7.3% and was the week’s top performing fund. Currency hedged commodities (QCB and QAU) were also amongst the better performers. Total flows into domestically domiciled ETFs were $309m, while outflows totalled $112m. New entrant, VanEck Vectors Australian Subordinated Debt ETF (SUBD) saw the largest inflows for the week, followed by a diverse range of fixed income, equity and commodity funds. A200 and AAA saw the bulk of the week’s outflows. A200 was the most traded fund last week, followed by VAS and VGS. SUBD saw strong volume in-line with its flows. ETFS Physical Palladium (ETPMPD) has returned more than 50% year-to-date. Increasingly tight supply and growing demand, primarily from the auto industry, have seen palladium prices trending higher for most of the past four years. At US$1,880 per ounce, palladium is trading at all-time highs and is now at close to a 30% premium to the price of gold.
Dec 09, 2019
Published: 5th December 2019 Product in Focus: ETFS Reliance India Nifty 50 ETF Key points: India’s economy has underlying strengths and over the past 12 years has become an economic powerhouse, jumping from the 11th to the 5th largest economy in the world. After a 2 year slow down, India’s outlook remains positive. RNAM forecasts GDP growth to recover towards 7% over the next 12-15 months. NDIA allows investors access to the Indian share market, a notoriously difficult region to invest, by tracking the performance of 50 of India’s leading blue-chip companies. India has been increasingly moving into the spotlight of many investors in recent years. Over the past 12 years India has jumped from the 11th to the 5th largest economy in the world and is likely to take 3rd position within a decade. This makes it difficult to ignore India when building a global equity portfolio. Further, the recent launch of ETFS Reliance India Nifty 50 ETF (ASX: NDIA), Australia’s first Indian-focused ETF, has provided investors with ready access to a market that was previously difficult to invest in. The case for India Structurally, India’s economy has underlying strengths that have enabled robust growth and provide a strong macro story. Demographics: with a median age of 28 years, India’s population is highly skewed towards young working-age people who drive both income and consumption. By 2030 India’s median age is forecast to rise to just 31, compared to 40 in the U.S. and 42 in China. Further, a dramatic urbanisation of the population is in progress, which will create a massive need for infrastructure investment across housing, transport, communications and utilities. Low debt levels: To this point Indian economic growth has not been excessively reliant on debt. Household leverage in India remains one of the lowest in the world, which presents a huge opportunity for sustained economic expansion. Strong domestic consumption: Nearly 60% of India’s GDP is driven by domestic private consumption, as compared to 40% in China. This provides India with a degree of protection against external demand shocks. Furthermore, India’s per capita spending is way below China and more in line with levels seen in China in the mid-2000s. Progressive reforms: India has undergone many reforms in the last 5 years. Most have been aimed at increasing compliance and transparency and removing red tape across the financial system. Longer-term, a stable and reform-focused regime should support an environment conducive to business and investment. Future Outlook While Indian growth has slowed over the past two years, the outlook remains positive. Reliance Nippon Life Asset Management forecasts GDP growth to recover towards 7% over the next 12-15 months. Key factors driving near-term growth include; Corporate tax cuts: India has recently reduced its effective corporate tax rate to 25.1% from over 30%. In addition, firms who set up new manufacturing units will enjoy an effective tax rate of 17.1%. This is expected to attract significant investment from foreign companies looking to access India’s domestic market and those looking to diversify away from China as uncertainty continues with regards to the global trade and tariff situation. Infrastructure spending: Government initiated infrastructure projects are a key driver of the Indian economy. It was recently announced that India will spend about $US 1.4 trillion over the next five years on projects including, for example, doubling the number of highways, airports and the capacity of ports, building 50 new metro systems in cities, electrifying and standardising the rail network and improving both rural irrigation and household access to piped water. Monetary policy: The RBI has cut policy rates by 1.35% over the past year to 5.15% to provide stimulus to the economy and counter the weakness seen in global demand. Low inventory levels: Inventory levels across the economy are well positioned to provide a favourable base for a recovery across the manufacturing sectors. Access to India The ETFS Reliance India Nifty 50 ETF offers Australian investors the ability to access the Indian share market via the ASX for the first time. NDIA tracks the Nifty50 Index, which is the primary benchmark for the Indian equity market. It not only provides a measure of the performance of 50 of India’s leading blue-chip companies, it also provides a representative picture of the entire Indian market. The 50 constituents account for 67% of overall Indian market capitalisation and 53% of total trading volume, as well as providing a broadly similar sector exposure to the wider market. Trailing returns Using India in a portfolio Investors looking to take a meaningful exposure to the Indian growth story should consider taking an exposure beyond broad emerging markets/Asia. India currently accounts for just 2.6% of global equity market capitalisation, despite having over 17% of the world’s population and 9.5% of the world’s GDP. In comparison, China, which is the most comparable country from a population perspective, currently accounts for 8.2% of global equity markets.  A tactical overweight to India would provide investors with a fairer reflection of India’s potential. While historical data does not present the entire picture of the Indian growth opportunity as it stands today, it is worthwhile investigating the impact that a heightened India exposure would have had on historic portfolio returns. To do so, we focus on the Asia ex Japan segment of world equity markets and compare the performance of the MSCI Asia ex Japan Index, which includes roughly a 10% allocation to India, to a portfolio comprised of 90% MSCI Asia ex Japan and 10% Nifty50 Index. The blended portfolio contains approximately a 19% India allocation. Cumulative returns over the past 20 years are shown in Chart 1. Over the full 20-year time series, the portfolio including the Nifty50 outperformed by 0.51% per annum, exhibited 0.5% per annum lower volatility and saw a 1% lower drawdown. By extension, risk-adjusted returns were also improved. Table Y summaries the portfolio risk and return characteristics over 3, 5, 10 and 20 years to give a picture of the contribution India would have made over a range of time horizons. In each case the over-weighting of India was positive for the portfolio from both a return and a risk perspective. Fund in Focus Name ETFS Reliance India Nifty 50 ETF ASX Code NDIA Management Fee 0.85%* Benchmark Nifty50 Index Inception Date 19 June 2019 Distributions Annual  Source: Bloomberg as at 30 November 2019. *Plus expense recoveries up to a maximum of 0.15% p.a.
Dec 04, 2019
Published: 4 December 2019 Product in focus: ETFS EURO STOXX 50® ETF Key Points As the chance of a no-deal Brexit becomes less likely and the UK looks set to leave EU in the next three months, the uncertainty that’s been overshadowing the European market for the last three years may soon be over. With the U.S. and China signalling they’re making progress to end their trade disputes, this could also offer some reprieve for the Eurozone’s economy, which has been a key victim of the U.S.-China trade war. ETFS EURO STOXX 50® ETF (ETSX) provides an investment proxy for those who believe these uncertainties will soon be alleviated, as the underlying economy of the Eurozone is deeply tied to both geopolitical events. Brexit May Come Soon Since the referendum held in June 2016, Brexit has remained in murky waters. In the latest turn of events, the EU has agreed to grant the UK another extension for three-months, however, given the frustration expressed by many leading EU countries, we expect this to be the last extension. Solving the deadlock around the Irish boarder is presenting a significant challenge for the UK parliament and EU to agree on. As such the UK may end up leaving the EU without a withdrawal agreement. Nevertheless, once Brexit happens, with or without a deal, the Eurozone will have one of its biggest overhanging uncertainties removed. Brexit has not been a good showcase to inspire other Eurozone countries to follow suit. The result of the European Parliament election held in May showed that although the uprising right-wing parties have seized more seats than ever before, the parliament is still firmly controlled by the pro-EU forces, while the next EU Parliament election won’t happen until 2024. We therefore expect a smoother ride for the Eurozone going forward, with other countries attempting their own Brexit seeming unlikely. Trade Wars and Europe President Trump started a big trade war with China and a mini-trade war with India, whilst also threatening to place tariffs on auto parts from Europe and Japan, although he is yet to act on these threats. America’s trade wars have caused havoc to the global economy and have already begun to harm America’s own economy. Investors who expect to see the U.S. unwinding more of its tariffs may invest in the eurozone, as it’s a good proxy for improving international trades. So how much damage has the U.S. trade wars brought to the Eurozone? Despite the U.S. not directly imposing tariffs on goods from the EU, the Eurozone economy has been affected by decreased trade and capital flows. Exports made up 46% of the Eurozone bloc’s output in 2018, compared to 12% of the United States’ and 19% of China’s, according to the World Bank. Looking into Germany, the biggest economy within the EU, the manufacturing PMI of the country has dropped from the 63.3 in December 2017 to the most recent 41.9 in October 2019, indicating that the manufacturing sector has been weakening for a while and is now in the contraction zone. Trade Talks Begin to Yield Results The most recent development of the U.S.-China trade war was a positive one. Following the meeting between the U.S. trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with Chinese Vice Premier Liu He, both the U.S. and China had signalled the two countries are close to reaching a “phase one” trade deal. A resolution to the trade wars could see a boost to the economy of the Eurozone given their reliance on and recent decline in international trade. Fund in Focus: ETFS EURO STOXX 50® ETF (ESTX) ESTX is designed to provide a blue-chip representation of super sector leaders in the eurozone. ESTX can be used as a tool for a tactical play for investors who believe the day for Brexit and the U.S.-China trade war resolutions are just around the corner. Name ETFS EURO STOXX 50® ETF ASX Code ESTX Management Fee 0.35% Benchmark EURO STOXX 50® Index Inception Date 19/07/2016 Distribution Frequency Semi-Annual
Dec 03, 2019
This week's highlights ETFS S&P Biotech ETF (CURE) was last week’s top performing ETF, returning 6.5%. Domestic resource funds also fared well, with MVR, OZR and QRE all posting strong gains. Australian property funds SLF and VAP were also amongst the top performers. China and emerging markets funds (CNEW and EMKT) declined for the week. Palladium surged to new all-time highs, with ETFS Physical Palladium (ETPMPD) returning 4.1%. Other precious metals pulled-back last week. Crude oil declined, with OOO falling 4.5% and global energy company fund FUEL down 1.9%. Total flows into domestically domiciled ETFs were $171m, while outflows totalled $51m. IOZ and GOLD saw the largest inflows for the week, followed by HBRD and MVW. Cash fund AAA saw the bulk of the outflows for the week. AAA was the most traded fund last week, followed by VAS and STW. VSO, VHY and GOLD saw above average volumes. ETFS S&P Biotech ETF (CURE) has gained more than 22% over the past two months. A raft of FDA approvals and some high profile acquisitions by large pharmaceutical companies have spurred a recovery across the biotechnology sector following a lacklustre year thus far. Further FDA activity is expected over the coming months.
Nov 26, 2019
This week's highlights Precious Metals and Healthcare rallied last week. ETFS S&P Biotech ETF (CURE) was up 4.3% over the week. Precious Metals Palladium, Platinum and Silver also had a good week. ETFS Physical Palladium (ETPMPD) was up 2.7%, ETFS Physical Platinum (ETPMPT) up 2.5% and ETFS Physical Silver (ETPMAG) up 2.2%. Australian Financials underperformed as Westpac fell heavily in light of recent developments. VanEck Vectors Australian Banks ETF (MVB) was down 3.4% and BetaShares S&P/ASX 200 Financials Sector ETF (QFN) was down 3%. Total net inflows were over $310m for the week. The best flows for the week were spread across Australian Equities and Gold. Australian Market Cap ETFs IOZ and STW both had strong inflows of $58m and $56m respectively. GOLD also had another strong week adding $14m as investors continue to add the physical bullion to their portfolios.
Nov 20, 2019
Published: 20 November 2019 Product in focus: ETFS Physical Gold Key Points: Gold has long been considered a safe-haven asset used by investors to hedge against event risk but is often not appreciated for the way in which it can aid portfolio returns in different market conditions. Over the long-term gold has close to zero correlation with share markets. This is good for investors. Uncorrelated assets provide diversification and help improve returns or reduce risk within a portfolio. ETFS Physical Gold (ASX: GOLD) is a simple and cost-effective and efficient way to access gold by providing a return equivalent to the movements in the gold spot price. At ETF Securities, as manager of Australia’s largest and the world’s oldest exchange traded gold product (ASX: GOLD), we spend a lot of time looking at how gold can work for our clients to improve outcomes across their portfolios. Gold is well-known as a hedge against event risk and as a way of preserving capital against inflation, but people often don’t appreciate how well a long-term holding can aid portfolio returns in different market conditions. When we talk about using gold in a portfolio, we tend to focus on its role as a core strategic holding, not an asset to trade in- and out- of on a regular basis. This article outlines five key reasons you should consider gold as a core holding. 1. Gold is an effective hedge against unpredictable events Gold has been one of best performing assets globally over the past year and has attracted a lot of attention. In Australian dollar terms gold has never been more valuable, having risen 32% over the 12-month period to the end of September. Not only has gold performed very well, but it has done so against a backdrop of rising geopolitical risk, periodic bouts of equity market volatility, global growth concerns and an abrupt shift in monetary policy, both domestically and abroad. The recent past is just one example in gold’s long history of performing well when markets are in turmoil or when risks are heightened. Other prominent examples include; the 1987 stock market crash; gold rose 6% while the S&P 500 fell 33% the global financial crisis; gold rose 26% while the S&P 500 fell 56% the European sovereign debt crisis; gold rose 9% while the S&P 500 fell 19% It is not surprising, therefore, that many people use gold as a safe-haven asset in much the same way they would use insurance to protect their physical assets. Of course, you don’t just take out home insurance when you feel a flood or fire may be imminent, which is why we advocate holding gold long-term to protect against events that are inherently unpredictable. 2. The price of gold is driven by many factors and is difficult to predict Gold does not conform to traditional financial asset principles and there is no widely accepted model to determine a fair price for gold. While many different models exist, it is fair to say that the price of gold is driven by a wide range of variables and is difficult to predict. Gold is both a consumption and an investment asset, which often makes it both pro- and counter-cyclical at the same time. Levels of economic growth are positively related to demand for gold for use in jewellery and technology products, while expectations of lower growth may drive investment or safe haven buying. Gold is used as a store of wealth and as protection against inflation, while it is also in demand when interest rates and inflation are low and economic prospect look poor. Further, central banks are key investors and have massive reserves and a wide range of different motivations for owning gold, which can heavily influence demand. With such an array of competing factors for which to account, forecasting changes in the price of gold and the timing of changes is extremely difficult. We therefore rarely recommend gold as a trade-in/trade-out investment, where market timing is key. Instead we focus on how gold can be used as a core strategic holding. Depending on their circumstances, we often see investors using gold with a 2%, 5% or 10% allocation across their portfolios. 3. Gold’s long-term returns are better than many other asset classes Since gold became a freely traded commodity in 1971 its price has increased by an average of 11.7% per year in Australian dollar terms. Chart 1 shows how gold has performed relative to other major asset classes from the perspective of an Australian investor. While some investors worry that gold produces no regular income, its overall returns have out-stripped many more widely used investments. Gold has significantly outperformed both fixed income investments and diversified commodities. Its long-term returns are comparable with share market returns. Chart 1. Source: Bloomberg data as at 30 September 2019. Returns shown are compounded annual growth rates. Australian Equity is represented by the S&P/ASX 200 Total Return Index. Global Equity is represented by the MSCI World Total Return Index. Australian Fixed Income is represented by the Bloomberg AusBond Composite 0+ Yr Index. Global Fixed Income is represented by the Bloomberg Barclays Global Aggregate Total Return Index. Commodities are represented by the Bloomberg Commodity Total Return Index. 4. Gold helps diversify your portfolio when you need it most Over the long-term gold has close to zero correlation with share markets. This is good for investors. Uncorrelated assets provide diversification and help improve returns or reduce risk within a portfolio. Table 1 shows correlations between gold and other major asset classes over 20 years and you can see that gold generally has low correlations with other assets. It tends to be negatively correlated with equities, while being mildly positively correlated with bonds and commodities. Table 1. Source: Bloomberg data as at 30 September 2019. Correlations are calculated monthly over 20 years in Australian dollars. Australian Equity is represented by the S&P/ASX 200 Total Return Index. Global Equity is represented by the MSCI World Total Return Index. Australian Fixed Income is represented by the Bloomberg AusBond Composite 0+ Yr Index. Global Fixed Income is represented by the Bloomberg Barclays Global Aggregate Total Return Index. Commodities are represented by the Bloomberg Commodity Total Return Index. Not only has gold’s correlation with share markets been low, it has the nice property that it has tended to become more negative when stock markets are falling. Chart 2 shows the correlation between gold and global equities separately considering periods where the equity returns are positive, and then negative. This contrasts with other uncorrelated or “alternative” assets that became highly correlated with stock markets during the GFC. Not only does gold benefit from safe-haven buying during times of market stress, unlike most other financial assets, it has no element of credit risk, which immunises it from extreme market dislocations. Chart 2. Source: Bloomberg data as at 30 September 2019. 5. Gold can improve risk-adjusted returns over the long-term To demonstrate the impact that a core gold position can have in a portfolio, we have simulated adding a gold holding to a collection of typical asset allocation models that include Australian and international equity and fixed income assets with four different allocations representing Conservative, Balanced, Growth and High Growth profiles. Charts 3 - 6 below show the outright return, volatility or risk (measured by standard deviation), maximum drawdown or biggest loss and the risk-adjusted return (measured by the Sharpe ratio) for each asset allocation portfolio and for each portfolio with the addition of 2%, 5% and 10% gold. Source: Morningstar Direct data from 31 March 2003 to 30 September 2019. Conservative, Balanced, Growth and High Growth portfolios are represented by the Vanguard LifeStrategy funds, which have been live since February 2003 or longer. Gold is represented by ETFS Physical Gold (ASX: GOLD), which has been live since March 2003. Figures quoted are in Australian dollars and are net of fees. What we observe is that the addition of gold to an otherwise diversified portfolio has aided performance in every case. Outright returns are higher and increase as the gold allocation is increased. From a risk perspective, however, the impact of gold is even more important. The addition of gold reduces risk through gold’s ability to provide diversification. Risk-adjusted returns are higher and importantly drawdowns, or worst-case scenarios, are significantly improved.  Bloomberg data as at 30 November 2018
Nov 18, 2019
This week's highlights Gold miners, property, healthcare and infrastructure funds outperformed last week. VanEck Vectors Gold Miners ETF (GDX) was the week’s top unleveraged performer. Property funds (SLF and MVA), global healthcare (IXJ), sustainability funds (FAIR and ETHI) and infrastructure (GLIN) were also amongst the top performers for the week. Asian equities underperformed, with IZZ, CETF, VAE and UBP all amongst the week's poorest performers. Precious metals mostly rallied. ETFS Physical Silver (ETPMAG) added 1.0% and ETFS Physical Gold (GOLD) was up 0.9%. ETFS Physical Palladium (ETPMPD) fell 1.8% from recent highs. Total flows into domestically domiciled ETFs were $399m, while outflows totalled $52m. New fund SELF saw the week’s largest inflows with $101m in seed funding. IHCB, IEM and QOZ saw the next largest inflows for the week, followed by a range of domestic equity funds. Cash fixed income funds IGB, AAA and IHEB saw the largest outflows for the week. VAS was the most traded fund last week, followed by AAA and IOZ. VSO and GOLD saw above average volumes. SelfWealth SMSF Leaders ETF (SELF) launched last week. The fund tracks an index that uses a unique and innovative peer-to-peer methodology to select a portfolio of ASX-listed companies based on the trading activities of over 80,000 SMSF portfolios.
Nov 13, 2019
Published: 13th November 2019 The global economy is showing signs of strain and expectations from investors around growth and income is decreasing. Can global infrastructure assets provide a solution? Infrastructure has long been a favourite equity asset class for investors as it offers the following characteristics: Access to long term stable cash flows, given people continue to pay for infrastructure in their day-to-day lives, e.g. toll roads, airports and utilities Upfront capital - investment is high for large infrastructure projects and generally the cash flows from investment are realised for long periods into the future High barriers to entry, reducing competition Infrastructure assets have the ability to produce stable income with low volatility and should therefore be a staple in investor portfolios. With the global uncertainty experienced so far during 2019, investors may look to infrastructure as a source of stable capital and yield. ETFS Global Core Infrastructure ETF CORE offers a low cost way to gain exposure to quality global infrastructure companies which have exhibited the least volatility in the last 6 months. CORE has been resilient during 2019’s market volatility and has returned 19% in the last 12 months with a yield of 4% (31 October 2019). Please see below some further information on CORE, outlining why you should consider this ETF for your infrastructure exposure. Attractive Income CORE has a 12 month yield of 4.11% to the 31 October 2019 Stable Growth Since CORE’s launch in 2017 it has returned over 13.5% p.a. Since its inception CORE has delivered risk adjusted returns (refer to sharpe ratio table) above both the S&P Global Infrastructure Index and the MSCI World Index Low Volatility CORE selects the 75 least volatile global infrastructure companies and weights them by their inverse volatility You can see the effect of CORE’s low volatility screen in the performance table below Period Total Return (p.a.) 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 3.16% 8.19% 18.89% 11.70% 13.66% S&P Global Infrastructure Index (AUD, TR) 4.03% 8.75% 24.39% 11.61% 12.69% MSCI World Index (AUD, TR) 2.48% 6.00% 15.70% 12.61% 15.40% Annualised Volatility 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 6.95% 6.97% 7.38% 8.04% 8.04% S&P Global Infrastructure Index (AUD, TR) 8.57% 8.37% 8.70% 8.95% 8.84% MSCI World Index (AUD, TR) 11.26% 10.74% 10.86% 10.67% 10.53% Sharpe Ratio 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 0.31 1.00 2.35 1.25 1.49 S&P Global Infrastructure Index (AU, TR) 0.35 0.90 2.63 1.11 1.24 MSCI World Index (AUD, TR) 0.13 0.45 1.30 1.02 1.30 Source: Bloomberg as at 31 October 2019. Returns in AUD. Past performance is not an indication of future performance. Global Diversification Due to CORE’s rules based approach it does not have a significant concentration in any single company and instead offers a diversified infrastructure exposure As at 31st October 2019 the top 10 stocks in CORE accounted for just 18.80% of the portfolio The US and Canada make up the largest portion of CORE’s portfolio, followed by Asia and Europe. Australia has a very small exposure in the index, with QUBE Holdings as the only Australian stock currently in the portfolio Source: Bloomberg as at 31 October 2019. Returns in AUD. Past performance is not an indication of future performance.
Nov 12, 2019
This week's highlights The improving trade outlook saw a risk-on sentiment return to global equity markets. Asia and technology focused funds outperformed. UBS IQ MSCI Asia APREX 50 Ethical ETF (UBP) was the week’s top performer, followed by ACDC and ASIA. Gold mining funds (GDX and MNRS) and property funds (REIT and MVA) were amongst the weeks poorest performers. Precious metals pulled-back. ETFS Physical Silver (ETPMAG) was the week’s biggest mover, closing down 6.5%. Gold and platinum also declined. Total flows into domestically domiciled ETFs were $253m, while outflows totalled $50m. IOZ and QAU saw the largest inflows for the week, followed by BILL and QPON. Cash fund AAA saw the largest outflows for the week. VAS was the most traded fund last week, followed by STW and AAA. IHCB and IEM saw above average volumes. ETFS Battery Tech & Lithium ETF (ACDC) offers investors equally-weighted exposure to the energy storage and production megatrend by investing in a selection of global companies that are either developers of battery storage technology, or producers of lithium. The fund has produced a year-to-date return of 16.9% .
Nov 05, 2019
This week's highlights The U.S. Equity Market hit fresh highs last week, which saw the iShares S&P 500 AUD Hedged ETF (IHVV) finish the week 1.5% up. Globally, the healthcare sector had a strong week, with BetaShares Global Healthcare ETF (Hedged) (DRUG) up 2.6% and ETFS S&P Biotech ETF (CURE) returning 1.6% for the week. Australian financials had a weak week. VanEck Vectors Australian Banks ETF (MVB) was down 3.4%, while SPDR S&P/ASX 200 Financials ex A-REIT Fund (OZF) and BetaShares S&P/ASX 200 Financials Sector ETF (QFN) were both down 3.1%. Total flows into domestically domiciled ETFs were $258m, while outflows totalled $62m. QPON and FUEL saw the largest inflows for the week, followed by HBRD and a mix of equity funds. IHCB and ILB saw the bulk of outflows for the week. VAS was the most traded fund last week, followed by FUEL and QPON. The best performing ETF Securities fund was the ETFS S&P Biotech ETF (CURE). This fund offers investors equally-weighted exposure to the U.S. biotechnology sub-sector. It captures returns from firms that focus on the research and development of innovative drugs and treatments. The performance of individual biotechnology companies can be speculative and is highly dependent on FDA approvals and M&A activity. CURE offers exposure to advances in the sector, while diversifying the single-name risk across more than 120 companies.
Oct 29, 2019
This week's highlights Global stocks rallied last week on a temporary truce in U.S.-China trade relations. High beta equities, such as ETFS S&P Biotech ETF (CURE) and BetaShares Global Cybersecurity ETF (HACK) posted strong gains. Oil rallied strongly, with OOO up 5.2% and energy company ETF (FUEL) returning 3.9% for the week. Precious metals also posted strong gains across the board. ETFS Physical Gold (GOLD) gained 1.9%, while ETFS Physical Platinum (ETPMPT) was the week’s overall top performing fund, returning 5.4%. Total flows into domestically domiciled ETFs were $227m, while outflows totalled $39m. AAA and QRE saw the largest inflows for the week, followed by GOLD and a mix of equity and fixed income funds. Domestic financial sector and property ETFs (QFN and MVA) saw the bulk of outflows for the week. VAS was the most traded fund last week, followed by STW and AAA. QFN and QRE saw above average volumes. ETFS S&P Biotech ETF (CURE) offers investors equally-weighted exposure to the U.S. biotechnology sub-sector. It captures returns from firms that focus on the research and development of innovative drugs and treatments. The performance of individual biotechnology companies can be speculative and is highly dependent on FDA approvals and M&A activity. CURE offers exposure to advances in the sector, while diversifying the single-name risk across more than 120 companies.
Oct 22, 2019
This week's highlights Global markets were stable last week albeit news from the latest IMF reports which gave a bearish outlook to international markets. The top performer for the week was ETFS Physical Palladium (ETPMPD), up 2.9%. Strong demand and limited supply has surged the precious metal spot price to fresh highs. Country specific exposures such as BetaShares Japan ETF (HJPN) and ETFS Reliance India Nifty 50 ETF (NDIA) both performed well, up 2.6% and 2% respectively. The worst performers over the week were HACK and PMGOLD, down 2.8% and 2.3%. Chinese and Australian resources exposures were also down over the week. VanEck Vectors ChinaAMC A-Share ETF (CETF) was down 2.3% and SPDR S&P/ASX 200 Resources Fund (OZR) down 2%. Flows into Australian ETFs totalled $148m and outflows were $81m. The best flows for the week were spread. ETFS Physical Gold (GOLD) had inflows of $10m, while a trio of iShares funds also received strong flows. SPDR S&P/ASX 200 Fund (STW) and BetaShares Australian High Interest Cash ETF (AAA) saw majority of the outflows.
Oct 15, 2019
This week's highlights European and Asian stocks rallied last week on optimism relating to U.S.-China relations and Brexit. BetaShares FTSE 100 ETF (F100) and ETFS EURO STOXX 50 ETF (ESTX) were the top performing equity ETFs for the week, followed by HEUR and UBE. CNEW and IKO were the top performing Asian equity funds. Gold fell below US$1,490 per ounce. ETFS Physical Gold (GOLD) fell 1.8%, while mining ETFs GDX and MNRS fell by close to 3%. Platinum and palladium funds added 1.2% and 1.8% respectively, while oil fund, OOO, added 3.7% for the week. Total flows into domestically domiciled ETFs were $228m, while outflows totalled $43m. IOZ dominated inflows with $105m, while STW saw $25m of outflows. GOLD saw $10m of inflows, while the remaining flows were spread between a mix of equity and fixed income funds. IOZ was the most traded fund last week, followed by other broad-based domestic funds (VAS and STW). VAP and VHY saw above average trading volumes. ETFS EURO STOXX 50 ETF (ESTX) offers investors exposure to 50 of the largest companies from across the eurozone. The EURO STOXX 50 Index, which is the key benchmark for eurozone equities, is one of the most liquid and traded indices across global equity markets. The fund holds well know European names including the likes of Total, SAP, LVMH and Siemens.
Oct 09, 2019
Published: 10th October 2019 Product in Focus: ETFS Battery Tech & Lithium ETF Key Points Bloomberg New Energy Finance predict that global lithium-ion battery demand will grow 8-fold by 2030. Over 2 million electric vehicles were sold in 2018, accounting for less than 2% of global passenger vehicle sales. Sales forecasts are estimated to rise to 56 million by 2040. ACDC aims to provide investors with exposure to growth across the entire battery technology value-chain, including lithium miners and energy storage companies. Recent years have seen significant developments in lithium-ion battery power output and efficiency. Lighter and smaller batteries with increased output and falling prices have opened-up a wide range of new applications. These have already had big impacts on the consumer electronics market. The next step in the evolution of the battery technology industry is in larger scale applications. Electric vehicles for private and mass transportation, aided by the emergence of autonomous vehicle technologies and the rapid reductions in charging times. Further, use of lithium-ion batteries is promoting the growth of renewable energy technologies such as solar and wind, which are now able be consumed on demand and not only at the right times, or when weather permits. ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) aims to provide investors with exposure to growth across the entire battery technology value-chain, from lithium miners to energy storage companies across a range of established and emerging companies. This note looks at the key areas driving growth across this quickly developing industry and highlights the operations of several selected companies to provide real-world examples of technological developments and how they are being monetised. Lithium – exploring the supply and demand outlooks Forecasts complied by Bloomberg New Energy Finance predict that global lithium-ion battery demand will grow 8-fold by 2030. This will have a significant impact on demand for lithium carbonate equivalent (LCE) and other core metals, such as copper, aluminium and nickel as well as rare earth metals, such as cobalt. China maintains a dominant position in the supply-chain through both its control of mining companies and its dominance of refining capacity. Electric vehicle demand is anticipated to be the core growth driver over the coming decades, with passenger EVs dominating. Current forecasts point to a supply surplus out to at least 2025, which has been reflected in recent price action. As shown in figure 3, lithium prices have been in decline for the past 15 months, following a three-year bull-run during which prices trebled. Stock in Focus: Albemarle Corp Stock Code: ALB Albemarle is the world’s largest producer of LCE and a pioneer in the development of brine production processes that are commonly used today. Products include lithium metal as ingots, foil, rods and anodes, high purity lithium alloys, lithium salts and lithium sulphide, all of which have battery-related applications. One of its stated aims is to provide materials and to support the growth and success of lithium-ion technology to promote advances in mobile communication, power storage and electric mobility. Production and storage sites are located in Europe, North and South America, Asia and Australia, while Albemarle’s customer base is spread across more than 100 countries. Source: www.albemarle.com Financial information as at 30 Sep 2019: Electric vehicles Over 2 million electric vehicles were sold in 2018, which represents significant growth from a low base, but accounts for less than 2% of global passenger vehicle sales. Forecasts compiled by Bloomberg New Energy Finance indicate accelerating growth over the coming decades with sales to rise to 10 million in 2025, 28 million in 2030 and 56 million by 2040. By the mid-2020s electric vehicle sales are expected to reach parity with internal combustion vehicles, at which point 30% of passenger vehicles on our roads will be electric. Stock in Focus: BYD Stock Code: 1211 BYD is a Chinese manufacturer of passenger vehicles, mass transit vehicles and battery technology and is heavily backed by Warren Buffett's Berkshire Hathaway, which holds a 25% stake. China currently represents around 60% of the global electric vehicle market, with over 600,000 fully electric vehicles sold in the first half of 2019. BYD is the largest Chinese producer, with market share currently running at close to 25%. BYD’s market share has increased in 2019 to-date, despite a slowing in the Chinese market as a result of the removal of subsidies. 63% of BYD’s revenue is currently generated by electric vehicles. Aside from passenger vehicles, BYD is currently a major supplier of electric busses, with government contracts across Asia, Europe and North and South America. BYD is also investing in large-scale battery storage projects. Source: www.byd.com, Bloomberg New Energy Finance Financial information as at 30 Sep 2019: Grid storage batteries The electric power sector has seen significant disruption from renewable sources in recent years, with wind, solar and other sources quickly becoming more economically viable relative to fossil fuel sources in many markets. Component costs are falling and efficiency is rising but improvements in battery technology have been the key to releasing these technologies and allowing them to meet consumer demand at times when the sun isn’t shining and the wind isn’t blowing. Bloomberg New Energy Finance predicts 50% of world electricity output to be wind and solar generated by 2050 and that this transformation will require heavy investment in battery technology. There are numerous competing battery types and new technologies under development. Examples include flow batteries, lead-carbon, sodium-sulphur and compressed-air energy storage. Lithium-ion, however, is the established technology of choice and currently accounts for 85% of commissioned, utility-scale battery storage worldwide. Source: Bloomberg New Energy Finance “New Energy Outlook 2019” Stock in Focus: GS YUASA Stock Code: 6674 GS Yuasa is a Japanese company that manufactures and sells automotive batteries, industrial batteries, power supply systems and other electrical equipment. They are a leader in lithium-ion technology and provide a range of storage solutions for renewable and reserve power applications. The company is involved in multiple large-scale energy storage projects including constructing one of the world’s largest lithium-ion batteries, to be connected to a wind energy plant in North Hokkaido, Japan. The battery will have an output of 240MW and a capacity of 720WMh, which is equivalent to 45,000 electric vehicles. Source: www.gs-yuasa.com Financial information as at 30 Sep 2019: About ACDC ACDC tracks the Solactive Battery Value-Chain Index, which aims to capture the performance of companies that are providers of electro-chemical storage technology and mining companies that produce metals that are primarily used for manufacturing of lithium batteries. Companies comprising the Index are determined by reference to: 1. The U.S. Department of Energy's DOE Global Energy Storage Database, which identifies companies that are electro-chemical storage technology providers; and 2. Metal Bulletin, which identifies mining companies that produce lithium. Constituents are equally weighted to provide maximum diversification. ACDC currently holds 29 stocks from seven countries with sector allocations heavily in favour of the Industrials, Materials and Consumer Discretionary sectors.
Oct 08, 2019
This week's highlights Asian stocks rallied last week, with IZZ, ITW, ASIA, IAA and IKO all amongst the top performing funds for the week. Technology stocks also rebounded, with HACK returning 2.7% for the week and TECH being the top performing fund of the ETF Securities’ range. Domestic equity ETFs were amongst the week’s poorest performers, led by bank-focused funds (MVB, OZF and QFN). Gold posted a moderate gain for the week, rising above US$1,500 per ounce, while platinum declined more than 5%. Oil also pulled-back, with OOO down 5.6%. Total flows into domestically domiciled ETFs were $182m, while outflows totalled $98m. Domestic equity funds saw both the largest inflows (A200 and IOZ) and the largest outflows (STW). GOLD saw A$12m of inflows, while the remainder of flows were into a range of equity and fixed income funds. STW was the most traded fund last week, followed by other broad-based domestic funds (VAS and IOZ). VAP saw above average trading volumes.
Oct 01, 2019
This week's highlights ETFS Reliance India Nifty 50 ETF (NDIA) was the top performing Australian ETF last week, returning 2.4%, as the Indian market continued to rally on the back of corporate tax cuts. IIND returned 1.9%. Global and domestic property funds (REIT, DJRE and MVA) were also amongst the week’s top performers. Asian equities (CNEW, ASIA, IKO, CETF and IZZ) all posted negative returns. U.S. healthcare stocks were also hit, with ETFS S&P Biotech ETF (CURE) down 7.5%. Gold declined moderately for the week, while gold mining ETFs (GDX and MNRS) posted bigger drops. ETFS Physical Palladium (ETPMPD) continued to rally. Oil pulled-back from last week’s gains, with OOO down 3.8%. Total flows into domestically domiciled ETFs were $321m, while outflows totalled just $1m. Inflows were dominated by domestic equities funds (A200, STW, IOZ and QOZ). Cash and fixed income ETFs (AAA, IAF, HBRD, CRED and QPON) also saw flows. STW was the most traded fund last week, followed by other broad-based domestic funds (VAS, A200, and IOZ). VHY saw above average trading volumes.
Sep 24, 2019
This week's highlights Oil rallied strongly following an attack on Saudi Arabia’s infrastructure. OOO returned 6.1% for the week. Gold returned to positive territory, having taken a breather over recent weeks, while palladium (ETPMPD) continued to reach new all-time highs. Gold mining funds (GDX and MNRS) were amongst the weeks’ top performers. The U.S. dollar strengthened last week, with the Australian dollar falling more than 1c to U.S. 67.66c. YANK was amongst the week’s top performing ETFs, while AUDS was the poorest performer for the week. Total flows into domestically domiciled ETFs were $163m, while outflows totalled $65m. The biggest inflows were into domestic equities (STW, MVW and A200), gold (GOLD), and fixed income (IAF, CRED, HBRD). Outflows were from Australian financial sector stocks (QFN) and U.S. equities (IVV). VAS was the most traded fund last week, followed by STW. QFN traded above average volumes, while GOLD continued to be in strong demand. ETFS Reliance India Nifty 50 ETF (NDIA) returned 3.4% for the week, including a 6.2% jump on Friday as the Modi government cut the basic corporate tax rate from 30% to 22% to stimulate economic growth.
Sep 17, 2019
This week's highlights A cooling in trade tensions, strong U.S. economic data and stimulus from the ECB contributed to a risk-on sentiment last week. Financial sector funds (BNKS and MVB) and high conviction growth funds such as RBTZ, ROBO and ACDC all performed strongly. Asia-focused funds HJPN and IKO were also amongst the top performers. The week’s best performing ETF was Vanguard Global Value Equity Active ETF (VVLU), which returned 5.8%. Gold fell for a second consecutive week, with GOLD and PMGOLD, as well as gold mining funds (GDX and MNRS) all amongst the weeks’ poorest performers. Silver (ETPMAG) also declined, while palladium (ETPMPD) pushed-ahead to new all-time highs above US$1,600 per ounce. Total flows into domestically domiciled ETFs were $308m, while outflows totalled $134m. The biggest inflows were into cash (AAA), domestic equities (STW and IOZ) and gold (GOLD). Outflows were from U.S. equities (IVV) and Australian government bonds (IGB). AAA was the most traded fund last week, though the combined volume of IVV and IHVV made S&P 500 the most traded index exposure for the week. GOLD continued to trade above average volumes. ETFS ROBO Global Robotics and Automation ETF (ROBO) returned 4.1% for the week, led higher by strong performances across the Industrial and Information Technology sectors in the U.S., Japan and Germany.
Sep 10, 2019
Published: 10th September 2019 Product in Focus: ETFS Physical Silver Key Points Silver has historically performed in a similar way to gold 50% of silver is used in industrial applications including solar cells and automotive electrics A supply shortage of silver may impact price in the future MER: 0.49% p.a. Silver has become increasingly interesting to many investors. Not only does it exhibit similar properties to it more popular brother, gold, but it also has a much wider application in industry which gold doesn’t have. As such, for strictly investment purposes, silver has historically performed in a similar way to gold, but also has further support from industrial manufacturing demand and applications. Investors should consider this precious metal if they want exposure to an asset that, historically, benefits from both investment and non-investment demand. Non-Investment Demand Non-Investment demand comprises about 50% of silver demand. This can be split into four categories, seen in the table below. For this note we focus on the industrial and technological aspects. Additionally, we briefly look at the supply deficit in silver, which should provide a support for silver prices. Demand Driver Million ounces Percentage (%) Industrial and technological (including solar, automotive, brazing and soldering) 593 52 Jewellery 204 18 Bar and coin 193 17 Silverware 60 (approx.) 5 Source: GFMS, Refinitov/Silver Institute, 31 July 2019 Industrial and Technological Demand The industrial and technological use of silver is integral to many of the current processes used in manufacturing. Crucially, it is expected to grow significantly over the next decade. David Holmes, a senior precious metals analyst from Heraues, made this comment on the growth in a conference held in London at the LBMA in late 2018. Silver’s “long-term fundamentals as industrial demand within the electronics’ sector is expected to double over the next 15 years.” Of the industrial demand drivers for price, the use of solar energy is probably the most interesting aspect. Moving forward, increased demand for silver is expected to come from the solar energy sector, since the precious metal is a great conductor of both heat and electricity, making it perfect for use in solar panels. Solar currently accounts for 2% of the world’s generated power that is expected to grow to 7% by 2030. (1) Additionally, the progressive move towards electrical vehicles will increase the use of silver in cars too. Last year, around 36 million ounces of silver were used in automobiles. Each car itself uses about half an ounce of silver but the continuing electrification of cars is set to see that increase to one ounce. To put this in context, every electrical action in a modern car is activated with silver-coated contacts. Basic functions such as starting the engine, opening power windows, adjusting power seats and closing a power trunk are all activated using a silver membrane switch. Demand Deficit Further bolstering the positive tailwinds for the silver price is the supply shortage. Until recently, this had little effect on price but, as non-investment demand makes up about 50% of silver’s overall demand, it’s hard to avoid the impact of this continuing trend of demand not being met. Investment Demand Silver’s investment demand is based on a combination of fundamental drivers but also impacted by momentum. Fundamental Fundamentally silver’s investment demand profile is almost identical to gold. Currently this is primarily based on the desire to avoid currency debasement and the need for protection from threats to investment returns like trade wars and the end of the equity cycle. As much has already been written on this in regard to gold, this note will assume good knowledge of this from the reader. Momentum Momentum is also a driver of silver. Often increased interest begets further interest, and this can either help the price of silver move up further than expected short term or serve as a strong support when there is a correction. On this, the futures market gives a good indicator of momentum via the “net speculative positions” charts. Below you can see that silver is currently net long in terms of its futures positioning, meaning that there are more buyers than sellers. On the short-term, one can see that the positioning has risen up very rapidly lately, however, crucially, it doesn’t look extended versus other periods – especially versus 2016. Furthermore, the current positioning is off the back of a period (2018 – Q1 2019) where, on several occasions, silver was in a net short position i.e. investors were betting that silver was going down. As you can see, this was the only time this was the case since 2009 and serves to reinforce the current position as not overbought. Gold/Silver Ratio Finally, there is the gold/silver ratio. Many look at this as an indicator as to whether gold is expensive relative to silver or vice versa. Currently, based on this measure, silver currently appears undervalued. For those who believe the relationship should reinstate itself, many are buying silver as well as gold. Our view at ETF Securities is that it is not entirely clear whether this relationship stands anymore, or, at least, is as strong as it once was. This is because the use of silver in a non-investment capacity has grown so much over the last decade that it is becoming equally as meaningful as the investment demand. This is in contract to gold which is much more driven by investment demand. Nonetheless, we are not saying the ratio has no value. Only that it should not be a primary driver of silver investment. Summary In summary, silver’s price is dictated by both investment and non-investment demand. Silver shares many of the same fundamental characteristics for investment demand as gold but, because it is used far more widely in manufacturing for industry and technology, its price is also dictated by non-investment demand too. Taking both into consideration in the current environment, silver’s prospects look attractive and we encourage investors to looks at this in more detail. (1) https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/5-factors-drive-silver-demand
Sep 10, 2019
This week's highlights Geopolitical risks continued to be the focus of markets last week. Asian stocks rallied on the withdrawal of the Hong Kong extradition bill and added stimulus in China. HJPN, CETF and CNEW were all amongst the week’s top performers. Domestic resource stocks also benefited, with QRE and OZR both performing strongly. Gold retreated from recent highs, with GOLD down 2.0% for the week. Gold mining ETFs (MNRS and GDX) were the worst performing funds for the week. Silver also pulled-back from recent gains, with ETPMAG falling 3.0%. Total flows into domestically domiciled ETFs were $226m, while outflows totalled $22m. The biggest inflows were into cash (AAA), gold (GOLD) and a range of other fixed income ETFs (HBRD, FLOT, BILL, QPON, IAF and XARO). STW was the most traded fund last week, while BBOZ and GOLD saw above average volumes. ETFS Physical Gold (GOLD) surpassed the A$1bn mark in total assets under management for the first time last week.
Sep 03, 2019
This week's highlights Best performers for the week were the suite of physically backed precious metal ETFs. ETFS Physical Platinum (ETPMPT) was up 10.9% for the week, ETFS Physical Silver (ETPMAG) was up 8.4% and ETFS Physical Palladium (ETPMPD) up 6.2%. YTD the top performers remain dominated by gold miners, led by VanEck Vectors Gold Miners ETF (GDX) up 48.2%. The worst performers were agricultural and long Aussie dollar ETFs, with the BetaShares Strong Australian Dollar Hedge Fund (AUDS) down 1.1%. Flows for the week consisted of inflows of $200 Million and outflows of $18 million. These flows were dominated by Australian equities, cash and physical gold. ETFS Physical Gold (GOLD), BetaShares Australia 200 ETF (A200) and iShares Core Cash ETF (BILL) all saw flows above $20 million.
Aug 27, 2019
This week's highlights There was a small respite for Australian Equity markets last week as the Aussie market closed up before the dip in the U.S.. Equity strategies and in particular gold miners saw the top end of positive returns. BetaShares Global Gold Miners ETF (Hedged) (MNRS) was the best performer over the week returning 4.9%. UBS IQ Morningstar Australia Quality ETF (ETF) also had a positive week up 3.2%. Over the Year to Date gold miners and infrastructure strategies remain strong performers. The VanEck Vectors Gold Miners ETF (GDX) was up 45.2%, BetaShares Global Gold Miners ETF (Hedged) (MNRS) up 42.8% and AMP Capital Global Infrastructure Securities Fund (GLIN) up 27.7%. Year to Date only nine ETFs have had negative returns. Precious metals and gold miners are the best performers over the last twelve months. ETFS Physical Palladium (ETPMPD) is up 70.5% and ETFS Physical Precious Metal Basket (ETPMPM) up 38.4%. Flows over the week consisted of inflows of $180 Million and outflows of $140 Million. Investors globally chased exposure to the safe haven of Gold and Bonds. Most of the inflows were into Australian Cash and Commodities. ETFS Physical Gold (GOLD), iShares S&P/ASX 200 ETF (IOZ) and iShares Core Cash ETF (BILL) all had strong inflows. The largest outflow was from BetaShares Australia 200 ETF (A200).
Aug 20, 2019
This week's highlights Last week saw positive returns across safe heaven assets like precious metals and consumer staples as volatility continued. China focused ETFs also had a positive bounce with VanEck Vectors China New Economy ETF (CNEW) returning 4.5% and VanEck Vectors ChinaAMC A-Share ETF (CETF) up 3.9%. The worst performers over the week were resources ETFs which were impacted by falling iron ore prices. BetaShares S&P/ASX 200 Resources Sector ETF (QRE) was down 4.2%. Year to Date best performers are Gold miners, property and China focused ETFs. VanEck Vectors Gold Miners ETF (GDX) is up 40.4% and of the worst performers only 10 ETFs are in negative territory. Looking longer term, twelve months to date the best performers are precious metal related ETFs. ETFS Physical Palladium (ETPMPD) is the best performer returning 76% and ETFS Physical Gold (GOLD) is up 37.2%. The worst performers are energy and oil ETFs. BetaShares Crude Oil Index ETF - Ccy Hedged (OOO) is down 18.1% over the period. Inflows for the week were seen mostly in GOLD as investors sought a safe haven given the global volatility over the last month. BetaShares FTSE 100 ETF (F100) also received heavy inflows from its recent launch. iShares Europe ETF (IEU) had outflows of 33.8 Million. Net flows for the ETF market were 77 Million, made up of inflows of 250 Million and outflows of 173 Million.
Aug 13, 2019
This week's highlights Global equities dropped last week as U.S.-China tensions escalated. European markets were also hit by political instability in Italy and slowing industrial activity. Gold mining ETFs (MNRS and GDX) were the top performing equity funds for the week. Asia-Pac ETFs (CETF, CNEW, UBP and IKO) along with domestic strategy ETFs (HVST, FAIR and SYI) were amongst the poorest performers. The precious metal rally continued. Silver (ETPMAG), gold (GOLD, PMGOLD and QAU) and palladium (ETPMPD) were all amongst the week’s best performing funds, along with a precious metal basket ETF (ETPMPM). Total flows into domestically domiciled ETFs were $302m, while outflows totalled $142m. The biggest inflows were into domestic equities (A200, MVW and IOZ) and gold (GOLD). Floating rate cash products (QPON and FLOT) were also popular. Outflows were primarily from broad international equities (IVV, IEU, ESTX and IJP). A200 was the most traded fund last week, ahead of STW and A200. GOLD continued to trade well above its average volume on sustained investor interest. ETFS Physical Gold (GOLD) returned 3.8% for the week and is now up 20.7% year-to-date. Last week gold traded above US$1,500 for the first time since 2013 and continues to hit new all-time highs in A$ terms. With bond yields continuing to fall, currency wars on the horizon and geopolitical tensions on the rise, there is a strong case for holding gold as both a portfolio diversifier and store of value. Globally over US$9bn has flowed into physical gold ETFs so far in 2019.
Aug 13, 2019
Published: 13th August 2019 Product in Focus: ETFS S&P/ASX 300 High Yield Plus ETF Key Points August reporting season is in full-swing, presenting investors with both opportunities and risks. ETFs offer a simple and cost-effective way to diversify away from single name risks. ZYAU, which holds companies based on quality and yield factors, could be an attractive solution over this period. Reporting season is upon us as most Australian companies prepare to present their financial results for the period ended 30 June 2019. This article looks at the risks and opportunities that may present themselves during the up-coming weeks and demonstrates how ETFs can be used to avoid some of the pitfalls that can arise. Reporting Season highlights Of the S&P/ASX 200 constituents, 152 will report by the end of this month, with activity peaking in the middle two-weeks of August. Highlights include Rio Tinto on 1st of August, Commonwealth Bank on the 7th, CSL Limited on 14th, Telstra Corp on the 15th and BHP Group on 20th. Wesfarmers and Woolworths report on 27th and 29th, respectively. Figure 1 provides a visual guide to the season ahead. Opportunity or Risk? Over the coming weeks market professionals will be positioning their portfolios and adjusting their ratings and targets in anticipation of earnings reports. Not only are they forecasting company results, following each announcement comes the task of digesting the details and evaluating how the market will react. With China’s slowing economy, global trade concerns, Brexit, Hong Kong and rate cuts on the cards both locally and abroad, there are also a lot of external factors to consider. For professional investors, reporting season represents an opportunity. Those with better insight into the workings of each company and a better ability to read how the market will interpret earnings reports and changes in external variables have a better chance of beating the market. For average investors, however, the risks of making a bad call on a single company can often outweigh the potential rewards. Stock Picking Is a Zero-Sum Game It is often not appreciated that stock picking and active management is a zero-sum game. For every investor who outperforms the market, another investor must underperform. The average return earned by all investors is, by definition, the return of the market. To demonstrate this, we introduce the concept of dispersion. Dispersion is a measure of how spread out stock returns are over a period of time. Figure 2 shows two simple examples. In Panel A, where dispersion is low, the opposite is true. To use an extreme example, in the case where all stocks have the same return, which is the market return, dispersion is zero and there is no ability for anyone to outperform the market. In Panel B, where stock returns are very spread out or dispersed, there are high rewards available for correctly picking the winners, but there are also high risks for backing the losers. How Risky Is Reporting Season? We now turn our attention to the Australian reporting season and investigate the dispersion of stocks over the two key reporting months; February and August. To do so we calculated the dispersion of S&P/ASX 200 stocks on a monthly basis over ten years, where dispersion is measured as the standard deviation of returns between stocks. Monthly dispersion numbers are then averaged across each calendar month over the sample period. Results are shown in Figure 3. As anticipated, the two highest dispersion months are February and August. On average the dispersion across these two months is over 2% higher than over other months. The conclusion that we draw from this is that reporting periods present both the biggest opportunity to beat the market, but also the biggest risk of lagging the market. For investors who do not have an edge, the risks of attempting to beat the market can be high. So, what can the average investor do to avoid such risks? Diversification using ETFs Exchange traded funds offer a simple and easy solution. They allow investors to purchase an entire portfolio of ASX-listed stocks in a single trade. Low-cost diversification is a key feature of ETFs and this is exactly what investors need over periods where single-name risk and market dispersion is anticipated to be high. Broad-based ETFs, which closely tracks the market, can be useful for riding-out risker periods, but investing in ETFs does not necessarily mean simply investing with the market. It is still possible to take an active position, while diversifying-away single stock risk. ETFs offer a wide range of different exposures, most of which provide significant diversification benefits. One strategy for reducing earnings-related volatility is to invest in high quality firms with stable income. ETF Securities offers a unique fund in this regard, which filters ASX-listed companies for both yield and quality. ZYAU provides exposure to a selection of 40 Australian companies that have high dividend yields and/or share buy-back rates. To be eligible for inclusion the companies must have stable or increasing dividends and must generate Free Cash Flow to Equity above the amount of their distributions. This avoids companies who are using debt to finance unsustainably high yields and helps to identify high quality companies. Companies with stable yields and strong cash flow generation tend to be well-established, stable businesses with strong balance sheets and may be less prone to negative earnings surprises. Fund Name ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU) Management Fee 0.35% per annum Benchmark S&P/ASX 300 Shareholder Yield Index Inception Date 9 June 2015 Distribution Frequency Quarterly 12 Month Yield 5.09% plus franking credits Holdings A full list of current holdings is available through the product PCF located here. In Summary ZYAU offers investors a portfolio of high quality, yield-paying stocks on the ASX that can help achieve diversification in a single trade at a relatively low cost. This can be particularly powerful over reporting season, where returns in individual stocks tend to be more spread out and the risks from choosing the wrong stocks is higher. ZYAU is currently yielding 5.09% p.a. plus franking credits and has consistently been one of the best performing Australian equity-income ETFs since coming to market in 2015.
Aug 06, 2019
This week's highlights Global equities declined last week despite the Fed’s first rate cut since 2008. Infrastructure and property ETFs (VBLD, VAP and MVA) were amongst the top performing equity funds, while Asia-Pac ETFs (IKO, IZZ, UBP and IAA) were the biggest decliners. In precious metal markets gold continued its strong run, while palladium saw a big drop. GOLD and PMGOLD both returned 3.2%, while gold mining ETF (GDX) topped the returns table for equity funds. Palladium fund ETPMPD fell 7.7%. The Australian dollar fell to US 68c. U.S. dollar ETFs (YANK, USD and ZUSD) were all amongst the weeks top performers. Total flows into domestically domiciled ETFs were $339m, while outflows totalled $12m. The biggest inflows were into cash (AAA) and broad-based equity funds (A200 and IVV). GOLD continues to attract strong flows, with over $75m of inflows since the beginning of June. AAA was the most traded fund last week, followed by domestic equity funds (VAS, STW and A200). GOLD traded well above its average volume. ETFS Global Core Infrastructure ETF (CORE) returned 1.2% for the week and is now up 15.1% year-to-date. CORE uses a dynamic, rules-based approach to stock selection, choosing the 75 least volatile infrastructure stocks globally on a quarterly basis.
Jul 30, 2019
This week's highlights Global equities advanced last week as the S&P 500 and Nasdaq 100 hit new all-time highs and the S&P/ASX 200 came close to doing likewise. Cyclical stocks outperformed, with ETFS Morningstar Global Technology ETF (TECH) topping the ETF performance charts. U.S. mid- and small-cap funds (IJH and IJR) and other tech-heavy funds including NDQ, HACK and ROBO followed. Global equity strategy funds including MGE and MOAT also posted strong weeks. Precious metal prices continued to rise ahead of the anticipated Fed rate cut this week. Platinum and silver were the biggest movers. Gold mining ETFs (MNRS and GDX) retreated. The Australian dollar fell below US 70c, driving unhedged ETFs higher. AUDS was the week’s poorest performing ETF, while YANK was amongst the top performers. Total flows into domestically domiciled ETFs were $307m, while outflows totalled $173m. The biggest inflows were into broad based domestic equity funds (A200 and IOZ), cash and fixed income funds (FLOT, QPON and AAA) and gold (GOLD). The largest outflows were from PLUS and STW. AAA was the most traded fund last week, while PLUS, QPON and FLOT all saw above average volumes as cash and fixed income funds dominated volumes. ETFS Morningstar Global Technology ETF (TECH) returned 5.0% for the week and is now up 29.9% year-to-date. Strong earnings from Google and across the semi-conductor industry propelled the sector higher. Morningstar’s moat methodology, which identifies quality companies with high levels of competitive advantage at attractive valuations, is used in TECH’s stock selection process.
Jul 22, 2019
This week's highlights Global equities ended the week lower on ongoing geopolitical risks and mixed economic data. The Australian share market posted a modest gain, with small cap ETFs (SMLL and VSO) outperforming. Oil prices slumped on the prospect of easing U.S.-Iran tensions and demand concerns. OOO declined 7.5% for the week and global energy companies (FUEL) were also impacted. Technology heavy funds including NDQ and CNEW were also amongst the week’s poorest performers. Precious metals benefited from the risk-off sentiment, pushing higher. Spot gold added 0.7%, hitting new 6-year highs, while silver jumped 6.4%. ETPMAG was the week’s top performing ETF, while platinum (ETPMPT), gold (QAU and GOLD) and a basket of four precious metals (ETPMPM) were all amongst the top performers. Gold mining ETFs (MNRS and GDX) benefited, each adding over 6% for the week. Total flows into domestically domiciled ETFs were $199m, while outflows totalled $35m. The biggest inflows were into cash and fixed income funds (AAA, IAF, HBRD, CRED and ISEC). Gold (GOLD) also saw strong flows. The largest outflow was from UBA. STW and AAA were the most traded funds last week, while A200 and VHY saw above average volumes. ETFS Physical Silver (ETPMAG) returned 7.1% for the week and the metal is now trading at US$16.20 per ounce, over 14% above its May low. Silver has lagged gold in recent years, despite growing industrial demand from technology-related industries, with the closely-monitored gold-to-silver price ratio recently touching levels not seen since 1992.
Jul 16, 2019
This week's highlights: Over the week BetaShares Crude Oil Index ETF - Ccy Hedged (OOO) returned 4.7% and BetaShares Commodities Basket ETF - Ccy Hedged (QCB) was up 2.5%. This resembled a strong trend as much of the top performers were hedged commodity products. The worst performers over the week were Robotics and Property ETFs. BetaShares Global Robotics and Artificial Intelligence ETF (RBTZ) ended the week down 3.5% and ETFS ROBO Global Robotics and Automation ETF (ROBO) was down 3.2%. YTD performance remains best among geared Australian and U.S. Equity funds with the worst performers conversely the Australian and U.S. bear funds. The best performers over the previous twelve months are ETFS Physical Palladium (ETPMPD) up 74.2% and VanEck Vectors Australian Property ETF (MVA) up 30.1%. Inflows for the week totalled $258 Million and outflows $107 Million. Notably SPDR S&P/ASX 200 Fund (STW) had outflows of $81.9 Million and BetaShares Australia 200 ETF (A200) had inflows of $60.5 Million. Cash, Bond and Gold ETFs also saw a steady inflows.
Jul 09, 2019
Product in focus: ETFS Reliance India Nifty 50 ETF (ASX Code: NDIA) Key Points The Indian economy is primed to benefit from the structural reforms of the Modi government. Domestic consumption is powering 60% of Indian GDP. The average age in India is just 28 supplying a young and agile workforce that are increasingly connected. India is the world’s largest democracy, the sixth largest economy and has a population of 1.3 billion, 54 times the number of people in Australia for approximately the same land size. The nation is undergoing a rapid transformation that was truly initiated by the liberalisation of the economy beginning in 1991. Structural changes to the economy have been brought about in recent years by the Modi government aiding the significant growth seen today. The fundamental driver of this growth is the increase in domestic consumption throughout the nation. Structural Reform Key reforms initiated by Modi have begun the process of formalising India’s economy and created a better environment for business. This has been reflected in the World Bank’s ease of doing business ranking, India is now ranked 77th in the world and significantly, this represents an increase in 53 positions over two years. Contributors to this progress include the introduction of GST in mid-2017 which centralised 17 indirect taxes that were previously levied. 2017 also saw the sovereign credit rating upgraded one level by Moody’s, the first movement in this in 14 years. The evolution of the economy can be seen through the fundamental shift from the previous agrarian focus to the more service-based economy we see today. Consumption A 2019 report by the World Economic Forum identified domestic consumption as the key driver of India’s economy today, powering 60% of GDP. The report outlines five significant contributors to India’s growing consumption: 1. Income growth India is undergoing a transformation in wealth, it is projected that 25 million households will be lifted out of poverty by 2030, reducing the percentage of households in poverty from 15% today to less than 5%. This is introducing a huge expansion of the middle class and uptick in consumption of everyday items. 2. Urbanisation 40% of Indian’s will live in urban areas by 2030 as there is a steady migration from rural regions to cities and increased population density urbanises previously small towns. This movement is compounding the need for core infrastructure developments to cope with additional population pressures. 3. Demographic change India has a median age of just 28 years. This young and, comparatively, highly educated work force will remain young through to 2030 with an expected median age of 31 years. Compare this to the expected median age in Australia of 40 years and China at 42 years. (1) 4. Technology and innovation Indian’s have embraced the new digital age, and in many cases, they have leap-frogged many of those technologies that emerged during the dot-com bubble. 80% of Indian’s use their mobile as the primary platform for accessing the internet with the desktop computer bypassed completely. This has created a highly engaged and agile market who are adopting many of the new technologies the share economy has to offer. Rideshare company Ola, a strong rival to Uber, was valued at $6.2 billion in May 2019 and has set a goal to bring one million electric vehicles onto the roads by 2021. (2) Projections suggest there will be 1.1 billion internet users in India by 2030, with each representing further opportunities to extend consumption and engage with the new service-based economy. 5. Changing consumer attitudes As the Indian population has become wealthier and more connected, the core attitudes of consumers are also changing. The growing middle class has led to the emergence of sectors in the market that were previously very small, including dining out, personal hygiene, organic food, health and fitness. Opportunity Awaits The Nifty50 Index is primed to benefit from the structural reforms currently happening in India. Financials make up almost 40% of the Nifty50 and these companies will arguably benefit the most from recent changes. With the policy of demonetisation and the introduction of GST boosting their performance. The second biggest overall sector in the index is the consumer sector, making up about 17% of the index, which will also benefit from India’s growing middle class, household consumption and urbanisation. India’s overall economic growth has been driven through domestic consumption and the Nifty50 is no different, with the index constituents generating a significant portion of their revenue onshore, despite their large cap nature. As global volatility increases with the threat of trade wars and political uncertainty, India can rely on its domestic consumption to achieve the 7.5% forecast growth in 2020 (IMF, April 2019). 1 https://www.statista.com/statistics/260493/median-age-of-the-population-in-australia/ 2 https://www.financialexpress.com/industry/sme/indias-2nd-most-valuable-startup-ola-valuation-to-hit-6-2-billion-new-funding-proposal-by-hyundai-kia-motors-show/1565464/
Jul 09, 2019
Published: 9th July 2019 Product in Focus: ETFS Physical Gold (ASX Code: Gold) Key Points Gold has been on a run in 2019 reaching a new all time high in AUD terms of over A$2000/ounce. Gold price is influenced by economic uncertainty and momentum Demand is high, driven by central bank and ETF purchasing Gold has been on a great run in 2019. US$ spot gold is up 9.1% since the start of the year and has recently been trading above US $1,400 for the first time since 2013 (as at 8th July 2019). In Australian dollar terms gold is hitting new all-time highs above A$2,000 an ounce. Fuelled by equity market volatility in late 2018 and recent heightened expectations of easing monetary policy, gold has performed precisely as would have been predicated by anyone anticipating the broader macro forces at work over the past year. Equity market volatility in early 2018 triggered a rally, which subsided as markets regrouped and set sail for new highs in the third quarter. Volatility returned the fourth quarter of 2018, driving gold higher again. All of this occurred with the backdrop of an abrupt shift in monetary policy from major central banks. To put gold’s price activity into context, it is worth looking at the historic drivers of the gold price. Research by the World Gold Council highlights the four broad categories of factors that influence the price of gold; This article looks at these four key factors in the context of the current market from a global perspective. Factor 1: Economic Expansion Despite much talk about the uncorrelated and counter-cyclical aspects of gold, like most assets, demand for gold is at least somewhat driven by the overall level activity and wealth in the global economy. Where savings and investment levels are high, demand for gold is high. Recent years have seen growing demand for gold from both India and China as levels of disposable wealth have grown. These two countries now account for more than 50% of global demand for gold. Conversely, a slowdown in the technology sector in late 2018 saw industrial demand fall by 3% in Q1 2019. While a broader economic slowdown seems to be in progress, the diversity of demand for gold and its traditional role as a strategic investment asset makes it unlikely that a reduction in economic activity will have a significant negative price impact on gold in the short-term. Factor 2: Risk and Uncertainty As an investment asset gold is commonly deployed as a portfolio diversifier, inflation hedge and quasi-insurance policy. Gold has shown persistently low levels of correlation with stocks and bonds over the long term, which means that the addition of gold to a portfolio is often able to improve risk-adjusted returns by adding diversification. Figure 3, below, shows the impact of adding gold to a typical balanced portfolio invested across Australian and international equities and fixed income (as represented by Vanguard’s LifeStrategy Balanced Fund). The conclusion here is that over the long-run a relatively small allocation to gold in a portfolio can have a consistent impact on the risk/return profile of the portfolio. In addition, gold can also have a substantial impact when other asset returns are stressed. This is evidenced in Figure 3(b) by the lower drawdowns, or losses experienced during the largest negative events. This leads us to gold’s commonly cited role as an “event risk” hedge. When major, unexpected events occur gold has, time and again, had a better outcome than equity markets. Figure 4, below, shows how gold fared versus the S&P 500 and ASX 200 through a selection of major financial events over the past four decades. When negative market events occur, gold’s correlation with mainstream asset classes tends to reduce and even become negative. This is in stark contrast to many other “alternative” assets, such as hedge fund strategies. During the global financial crisis, these were seen to be highly correlated to equity markets as investors simultaneously rushed to the exit of anything but the safest stores of value. Not only is gold highly liquid, its other important feature is that it has no credit risk. Unlike other asset classes, during times of financial stress when risk premiums are raised correlations between other assets rise as investors simultaneously look to sell, while gold often moves the other way on safe-haven buying. While such major events are unpredictable by nature, there is a growing case to be made that equity market valuations are currently stretched and that the volatility seen in early and late 2018 could well return in the near-term. Even if the monetary authorities are ahead of the curve and manage to engineer a soft landing, late-phase bull-markets are synonymous with bouts of volatility. As with any insurance policy, premiums are paid in the hope you never need to make a claim. Factor 3: Opportunity Cost The most common argument made against investing in gold is that gold has no intrinsic value because it produces no income and in fact produces negative income if you account for storage and security costs. This is certainly true in a literal sense. As has already been demonstrated, however, this should not detract from the role gold can play in a portfolio and the potential value it adds. The opportunity cost associated with holding gold is driven by the income and gains forgone by investing in gold over other asset classes. This is clearest in relation to bonds - when interest rates are high the relative cost of owning gold is high. Bonds may provide the necessary diversification, while also providing attractive levels of income. When yields are low, however, that cost of owning gold is reduced, making gold a more attractive play. In cases where yields are negative, as we currently see across Japan and the eurozone, gold effectively provides a positive yield. In the current market, not only are interest rates at the low end of the historic range, but monetary authorities, most importantly in the U.S., but also in Australia and Europe, have recently shifted from a normalisation/tightening bias, to a stimulatory/easing bias. Figure 5, below, demonstrates the very close relationship between gold and the U.S. 2-year Treasury yield over the past 18 months. Furthermore, over the past two easing cycles in the U.S. between 2001-03 and between 2007-08 gold appreciated by 31% and 17% respectively. Research by the World Gold Council also suggests that not only do lower interest rates raise demand for gold, but that interest rates have a greater impact on gold in periods where there is a shift in stance, which is exactly what we have seen over the past few months. Markets are now pricing a 100% probability of a Fed cut at the end of July. The likelihood of this was less than 20% as recently as late-May. Factor 4: Momentum Like most assets, gold is susceptible to trends and changes in momentum as it moves in and out of favour and the current trend is overwhelmingly positive. A key area of investment demand is from exchange traded funds (ETFs). Figure 6 shows that global ETF holdings have been steadily rising since early 2016. There are now over 74 million troy ounces of gold supporting physically-backed ETFs, which provide investors with access to gold on most global stock exchanges. ETF users range from larger institutional to small retail investors. Central bank demand is also growing and has been doing so since 2010. Net purchases are at historic highs and diversified across a wide range of nations. According to the World Gold Council 9 central banks added more than a tonne of gold to their reserves in Q1 2019. Conclusion In summary, gold has picked-up a strong tail-wind in recent months. Demand for gold continues to grow on multiple fronts. The case for using gold as a portfolio diversifier is also becoming clearer as interest rates decline and future growth prospects of global economies are questioned. For investors who are concerned with the risk of drastic, unexpected events it is hard to go past the track record of gold in helping to reduce losses in such scenarios. How to invest? Investors looking to add gold exposure to their portfolios can do so via ETFS Physical Gold (ASX: GOLD). GOLD is the oldest and largest gold ETF traded on the ASX. It is fully-backed by physical gold bullion vaulted on behalf of investors in the fund. GOLD charges a management fee of 0.40% per annum.
Jul 09, 2019
This week's highlights The Australian share market rallied last week following the RBA’s 25 basis point rate cut. Property ETFs responded strongly, with MVA, VAP and SLF all amongst the top performers. Domestic equity income funds including DIV and EINC also performed strongly. The U.S. dollar gained ground following better than anticipated employment numbers on Friday, tempering expectations of a Fed rate cut this month. Currency funds AUDS, POU and EEU were amongst the worst performing ETFs for the week. ETFS Physical Gold (GOLD) pulled-back from its recent peak falling 0.8% for the week, while gold miners (MNRS) fell 1.0%. Crude oil (OOO) dipped 1.6% on global demand concerns. Total flows into domestically domiciled ETFs were $200m, while outflows totalled $40m. The biggest inflows were into defensive assets such as cash and fixed income/hybrid funds (AAA, IAF, HBRD and BILL) and gold (GOLD). The bulk of outflows were from STW. STW and AAA were the most traded fund last week, while VAP and MGE saw above average volumes. ETFS Physical Palladium (ETPMPD) returned 4.0% for the week and is up 75.2% over the past 12 months. Palladium has all-but recovered from its recent dip and could test all-time highs close to US$1,600 per ounce in the coming weeks.
Jul 02, 2019
This week's highlights Global equity markets softened last week ahead of the resumption of U.S.-China trade talks. Resources and commodity stocks outperformed last week as safe-haven assets gained favour. Gold reached new 6-year highs moving above US$1,400 per ounce, while OZR, QAU and MNRS were amongst the top performers. The worst performers over the week were actively managed products MGE, MHG and MICH. With real estate and infrastructure products generally having a downward trend. Total flows into domestically domiciled ETFs were $342m, while outflows totalled $17m for the week. The biggest inflows were into broad-based domestic equity funds (STW, A200 and MVW) as well as cash (AAA and BILL) and a range of equity and fixed income funds. ETFS Physical Gold (GOLD) saw A$24.5m of inflows for the month of June. STW was the most traded fund last week, while VAF and GOLD saw above average volumes. ETFS Physical Gold (GOLD) and ETFS Physical Precious Metals Basket (ETPMPM) both hit since inception highs last week.
Jun 25, 2019
This week's highlights Risk assets rallied last week on rate-cut expectations in the U.S. and eurozone. Resources and commodity stocks outperformed. Gold mining ETFs (GDX and MNRS) were amongst the top performers for the week, while China and Asia-Pac ETFs performed strongly across the board. ETFS S&P Biotech ETF (CURE) returned 6.4% for the week. Gold rallied above US$1,400 for the first time since 2013 and hit new all-time highs in Australian dollar terms. GOLD returned 2.8% for the week. Oil (OOO) returned 8.8% for the week following the Iran drone attack. Total flows into domestically domiciled ETFs were $182m, while outflows totalled $71m. The biggest inflows were into Russell Australia Responsible Investment ETF (RARI), broad based Australian equity funds (IOZ, A200 and STW), a range of domestic fixed income/hybrid funds (HBRD and AAA) and GOLD. STW and AAA were the most traded funds last week, while GOLD and GEAR saw above average volumes. ETF Securities launched Australia’s first India ETF on Friday; ETFS Reliance India Nifty 50 ETF (NDIA), which tracks the Nifty50, India’s flagship benchmark index.
Jun 21, 2019
Product In Focus: ETFS Reliance India Nifty 50 ETF (NDIA) Key Points India has the world’s second largest population and is soon expected to surpass China The median age is just 28, this young demographic is powering significant growth The World Bank has estimated that India’s 2019/20 GDP growth will be 7.5% ETF Securities have launched Australia’s first ETF giving access to Indian equities (ASX Code: NDIA) The colour and chaos that is India has always captivated the imagination like no other country. From ancient agrarian beginnings, shaped by five thousand years of political, cultural and religious diversity, India is now emerging as an economic powerhouse. With a population of almost 1.3 billion people and one of the fastest growing economies in the world, many commentators are hailing India as ‘the new China’. Australian investors now have the opportunity to access this vibrant and rapidly growing economy with the launch by ETF Securities of the first exchange traded fund offering exposure to Indian stocks. What is propelling the India growth story? It is difficult to ignore the sheer scale of India. Currently the world’s second most populous nation, India is expected to claim the number one spot from China within the next decade. By 2025, it is estimated that one fifth of the world’s working age population will be Indian. And, with a median age of just 28 years, India’s young demographic is expected to power the country’s economy into the next decade. The potential is clearly shown by the pace at which Indians have embraced digital technology. With a take up rate second only to Indonesia, the number of Indian internet users is expected to hit 1.1 billion by 2030. Already, Indians spend more time on social media than their counterparts in China and the United States. The World Bank recently estimated that India’s GDP would grow by 7.5% in 2019/20, and continue this pattern in 2021 and 2022, pointing to the increasing resilience of its economy. Consumption among India’s younger demographic is only part of the story. The growth upswing is also being driven by increased foreign investment, which has been encouraged by structural reforms in the taxation and business sectors. Reserve Bank of India figures show that investment activity accelerated by 12.2% in 2018/19 compared to 7.6% in the previous year. Significantly, much of the investment over the past two decades has found its way not into industry but into a booming services sector. Social reforms and policy initiatives in infrastructure development, health and rural transformation have also played a big part, shifting India’s economy from one characterised by overwhelmingly high levels of poverty to one with an increasing degree of self-sufficiency. The changing face of India is reflected in the shrinking number of its citizens living in extreme poverty, which was slashed from 46% to an estimated 13.4% in the two decades leading up to 2015, according to the World Bank. In the past two decades, per capita income in India has risen fivefold, passenger car sales by 5.5 times and the number of inbound tourists by 8 times. The Asian Development Bank in its latest Asian Development Outlook said that it, too, expected the Indian economy to outperform, although its forecasts were slightly less bullish than the World Bank at 7.2% for FY2019/20. “India has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains. The country’s young workforce, an improving business climate and a renewed focus on export expansion all support this,” the ADB said. “An increase in utilisation of production capacity by firms, along with falling levels of stressed assets held by banks and easing of credit restrictions on certain banks, is expected to help investment grow at a healthy rate.” Challenges ahead Although India’s economic development in recent years has outstripped that of many other emerging markets, the country still faces some challenges to ensure progress extends to all demographic and geographic areas. These key challenges include skill development and employment for the future workforce, creating a healthy and sustainable population, and lowering barriers for socio-economic inclusion of India’s rural population. Some commentators predict that India needs annual growth of 8% to create enough jobs for the more than 12 million young Indians entering the workforce each year. However, the unevenness of the growth in the economy has meant that growth in jobs has not kept pace. A recent McKinsey Global Institute study concluded that the digitisation of India’s economy could create 65 million jobs by 2025 but 40 million workers would need to be retrained to do them. India is at a tipping point and the time is ripe for key stakeholders within the public and private sector to come together to address these issues head on. Doing so will unshackle the potential of India’s youthful and technologically connected population and allow India to be a model for other fast-growing consumers markets. Indian election The recent return to power of the Bharatiya Janata Party (BJP), headed by Narendra Modi has been viewed as a positive, although the government faces several challenges to maintain the country’s economic momentum. Modi has been praised for his swiftness in dealing with geopolitical issues and implementing key supply-side reforms. Some commentators, however, have been critical that he has not delivered on economic promises to create more jobs, particularly in rural areas, where two thirds of the population is based. This will be a key target for his government over his second five year term. First ETF for India (NDIA) ETF Securities has teamed with Reliance Nippon Life Asset Management, one of India’s largest asset managers, for the launch of its NDIA ETF. Reliance has a 23 year track record in India and has some $USD 61 billion under management. NDIA will invest in a basket of stocks based on the Nifty50 Index – which comprises the 50 biggest listed companies listed on the National Stock Exchange (NSE), including HDFC Bank, Reliance Industries, Housing Development Finance Corporation, Infosys, ITC, ICICI Bank and Hindustan Unilever. It accounts for 13 sectors representing about 66.8% of the free float market capitalisation of the stocks listed on the NSE. The Nifty50 is up 13.6% over the past year and 16.3% over five years. Until now, India has been difficult for offshore investors to access due to the country’s strict foreign investment rules. Although there are a few unlisted “active” funds that invest in India, ETF Securities’ NDIA is the first vehicle for passive investment available to Australian investors. ETF Securities is Australia’s only independent ETF provider. Founded by philanthropist Graham Tuckwell, the group has more than A$1 billion in funds under management, across sectors as diverse as robotics, biotechnology, infrastructure and commodities.
Jun 18, 2019
This week's highlights Resources and commodity stocks outperformed last week, dominating the top performing ETFs for the week. Palladium continued its renewed rally, with ETPMPD returning 8.8% for the week. S&P/ASX 200 Resources Sector funds (QRE and OZR) returned close to 5%, while agriculture (QAG), precious metals (ETPMPM) and gold miners (GDX) all gained in excess of 4%. China rallied on economic stimulus measures despite the Hong Kong protests with both CNEW and CETF amongst the top performers. Oil (OOO), energy company (FUEL) and long Australian dollar (AUDS) funds were amongst the poorest performers for the week. Total flows into domestically domiciled ETFs were $73m, while outflows totalled $11m. The biggest inflows were into VanEck Vectors Australian Equal Weight ETF (MVW) and a range of domestic fixed income/hybrid funds (CRED, HBRD and IAF). AAA was the most traded fund last week, while CRED and VAP saw above average volumes. ETFS Morningstar Global Technology ETF (TECH) returned 1.5% for the week and is up 18.5% year-to-date. It provides exposure to the global technology sector with a tilt to attractively valued firms, using Morningstar’s moat methodology.
Jun 12, 2019
This week's highlights This week saw the RBA cut rates to 1.25% after 33 months on hold. Australian Financials and Materials rallied but this was not a match for the performance across some global and U.S. strategies. The top performers for the week were BetaShares Geared US Equity Fund - Ccy Hedged (GGUS) up 10.3% and BetaShares Global Gold Miners ETF (Hedged) (MNRS) up 5.5%. The worst performers over the week were the BetaShares US Equities Strong Bear HF - Hedged (BBUS) down -9.4% and VanEck Vectors China New Economy ETF (CNEW) down -5.9%. Chinese markets pricing is the latest in the U.S.-China trade wars. Looking longer term, bear strategies with exposure to U.S. and Australian markets are the worst performers over the year-to-date and last 12 months. BetaShares Australian Equities Strong Bear (BBOZ) down -31.7% YTD. The best performers over 12 months remain ETFS Physical Palladium (ETPMPD) up 43.2% and VanEck Vectors Australian Property ETF (MVA) up 30%. Looking at flows over the week there were $294 million in outflows and $87 million in inflows for ETFs. The outflows were from BetaShares Australia 200 ETF (A200) with outflows of $135 million and BetaShares Australian High Interest Cash ETF (AAA) with outflows of $93 million. VanEck Vectors Australian Equal Weight ETF (MVW) saw the largest inflows of $18 million.
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 16, 2019
Product In Focus: ETF Securities Future Present Range Megatrends are powerful forces that have the potential to cause long term structural changes in the economy and society. The Future Present range has been designed to give investors access to the emerging megatrends that are starting to define the world we live in. The range’s products positive performance is testament to investor trends. CURE up 22.0% year to date, ROBO 22.5%, TECH 20.7% and ACDC 7.1% (as at 12 April 2019) One of the most challenging aspects of investing has always been identifying ‘the next big thing’. In a rapidly changing world, where megatrends are drastically reshaping the way we live and do business, that process has become even more complex. Megatrends are best described as powerful forces – either socioeconomic, environmental or technological – that have the potential to cause long term structural changes in the economy and society as a whole. Technological advancement, demographic shifts, urbanisation and climate change are just some of the key megatrends combining to redefine the investment landscape. While the various megatrends are disrupting our lives in different ways, they are intertwined by the common thread of digitisation and the associated explosion in the power of data. Some are already dramatically changing the way particular industries operate. For example, the push for renewable energy is transforming car manufacturing with the rise of electrification, while artificial intelligence has seen robots replace thousands of jobs on the assembly line. Certainly, with the pace of change across business and society growing exponentially, investors cannot afford to ignore the influence of megatrends. Accessing investment in these megatrends, however, can be difficult for investors with limited knowledge or expertise in the technologies involved. Many of the best investment opportunities to tap into megatrends also involve going offshore. A good option for investors looking for exposure to megatrends is to invest in one of the specialised exchange traded funds (ETFs) that have emerged in recent years. ETFs have the advantage of offering investors a cost effective way to access the growth potential of various megatrends, while also providing an avenue for global diversity. Most ETFs tend to focus on a particular theme associated with one or more of the megatrends. US and European issuers have led the way, with ETF’s offering exposure to a diverse range of megatrends including technological progress and automation, digitalisation, ageing population, Asia’s expanding middle class, healthcare innovation, urbanisation, cybersecurity, water supply and even diversity and gender equality. In Australia, ETF Securities offers the Future Present range, which focuses on four funds providing access to disruption in sectors that will have a more dominant role in the future. These include robotics and artificial intelligence (ROBO), battery technology (ACDC), biotechnology (CURE) and broad global technology (TECH). Robotics and AI Once the subject of fantasy and science fiction thrillers, robotics are increasingly part of our everyday lives and look set to dominate the future. Already being widely used in manufacturing and online retail distribution, robots are expected to rapidly penetrate other industries as automation continues apace and companies seek to unlock productivity gains and improve profitability. The potential for growth is reflected in the fact that the world’s largest economy, China, has approximately 1 robot per 100 manufacturing workers, well down on the 7 per 100 employee in Singapore and South Korea. The growth in robotics will be driven by the efficiency gains on offer as robots perform monotonous tasks with high levels of precision and lower costs than their human counterparts. A report issued last year by the jobs website, Adzuna, found that 1 in 3 Australian jobs are at risk of automation by 2030. The potential for Robotics and AI, however, extends far beyond manufacturing efficiencies. A recent article by Raffaello D’Andrea, co-founder of Amazon Robotics and strategic adviser to ROBO Global, noted the limitless applications. “Using AI-fuelled robotics to farm the land more efficiently, we will we be able to provide food and shelter for ourselves and our families with ease. 5G networks will support everything from self-driving vehicles to digital medicine to ‘smart cities’” he said. ETF Securities’ global robotics and automation ETF (ROBO) tracks the performance of the ROBO Global Robotics and Automation index. It invests in a mix of stocks whose business is related to robotics, automation and AI. Battery Technology Climate change is causing a major push towards renewable energy, which is in turn, driving investment in alternative energy storage. Ultimately the companies behind this technology hope to develop batteries efficient enough to fly planes and feed power stations. For now, however, the most tangible example of battery application is the rapidly expanding world of electric vehicles (EV). Although initially slow to take off, EV sales are dramatically ramping up in some parts of the world. Norway has had by far the biggest take up of electric cars, with 49% of all sales, followed by Iceland and Sweden. Notably, however, the five countries in which EVs are the most popular account for only 0.5% of the world’s population. Chinese drivers are rapidly coming aboard, with over a million new vehicles hitting the road in 2018. Crucially, China also leads the market for charging stations. Australian sales have been slow to take off but will gather momentum, particularly if the ALP wins power at the next Federal Election. The ALP has set a 50% target for electric vehicles as a percentage of new passenger vehicles sales by 2030. ETF Securities was the first Australia issuer to bring out an ETF focused on energy storage and production (ACDC). The fund provides investors with access to companies involved in battery technology and the mining of lithium, which is used to make a range of batteries, including those found in your mobile phone. ACDC tracks the Solactive Battery Value-Chain Index. Investors can also gain exposure to the renewable energy megatrend by investing in Palladium, a key metal used by car manufacturers to control emissions from gasoline engines, which are replacing diesel under crackdowns on vehicle pollution in overseas markets. Palladium prices have recently hit record highs, reflecting strong demand from car manufacturers. ETFS offers investors an avenue to invest through ETFS Physical Palladium (ETPMPD). Biotechnology Biotechnology is one of the original megatrends. Scientific advances in the development of potential new treatments for diseases such as cancer, as well as excitement around the application of DNA sequencing, have underpinned interest in biotechnology companies for many years. However, the prospect of an ageing population, coupled with the increasing incidence of chronic illnesses such as diabetes and dementia, have reinforced the significance of biotechnology companies going forward. As well as searching for therapies to help treat chronic illnesses, biotechnology may also hold the key to solving food security, which poses significant challenges with the world population tipped to exceed 9 billion by 2050. One of the difficulties posed by investment in biotechnology is its highly speculative nature and the lengthy lead times involved with new discoveries. For example, it can take 10-15 years from the conceptual stage for a drug to reach the marketplace, usually with little to no income in the intervening period. Another difficulty is that, with the exception of a few listed Australian stocks, the bulk of biotech companies are located overseas. For this reason, biotechnology is a megatrend that is particularly well suited to an ETF. The ETFS S&P Biotech ETF (CURE) issued by ETF Securities late last year replicates the S&P Biotechnology Select Industry Index, which offers exposure to approximately 120 small-to-large cap international biotech companies. These include the likes of Seattle Genetics which is focused on producing specialised cancer therapies and Amgen, whose Enbrel treatment for arthritis had 2017 sales of US$5.4 billion. The recent performance of ETF Securities’ Future Present range demonstrate that investors are warming to the megatrend thematic with CURE UP 22.0% year to date, ROBO 22.5%, TECH 20.7% and ACDC 7.1% (as at 12 April 2019). For retail investors, ETFs continue to offer a low cost way into some of the themes that look set to dominate the investment horizon for some time to come.
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 08, 2019
Product in Focus: TECH - ETFS Morningstar Global Technology ETF The tech sector has provided significant opportunities for growth investing in recent years Prudent technology investors should examine value and quality stocks TECH actively selects technology leaders that have a competitive advantage over other companies The portfolio contains 25 to 50 stocks from a global universe Technology Is On A Roll The Information Technology (IT) sector has contributed nearly 30%(1) of total global equity returns over the past 5 years. This is more than double the performance of the next best sector - consumer discretionary, which itself can attribute much of its performance to 'tech style' stocks such as Amazon. Although there have been speed bumps along this growth trajectory there is a consensus that the incorporation of technology into our daily lives and the subsequent growth of the companies behind this will continue for some time. The big-name FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) have sky-rocketed, with Apple and Amazon becoming the first two companies to top the US$1 trillion mark in 2018 and Microsoft recently achieving the same milestone. The Nasdaq 100 hit new all-time highs in April and to date has only posted a single negative week in 2019. As such, losses in the correction of the last quarter of 2018 have largely been recouped, but the volatility has not been forgotten by many. Questions, rightly, are being raised as to whether valuations are overblown, whether we are building towards a second tech bubble or, alternatively, whether the technology revolution is only just beginning. How Do you Navigate Stretched Valuations and Volatility? Exciting times lie ahead for technology companies, but it’s unlikely to be completely smooth sailing, with bouts of volatility always a possibility. Prudent technology investors should consider: Introducing ETFS Morningstar Global Technology ETF (ASX: TECH) ETFS Morningstar Global Technology ETF (TECH), which tracks the Morningstar Developed Markets Technology Moat Focus Index, was designed with this approach in mind. Here’s how its stock selection works to provide exposure to technology sector growth, while focusing on value, quality and diversification. ➢ Growth As a technology sector fund, TECH is by default highly exposed to growth as an investment factor. It is worth, however, clarifying exactly what constitutes a technology stock in this context. Relative to the well-known Nasdaq 100, this fund is less broad from a sector viewpoint, but broader on a regional basis. The Nasdaq 100, while highly technology exposed, is currently only about 45% invested in pure technology companies. TECH is therefore a more pure-play in terms of exposure to technology growth. Of the FAANG stocks TECH currently holds Apple, Google and Facebook. ➢ Value TECH benefits from research and analysis conducted by Morningstar’s extensive team of global equity analysts in assessing the fair value of eligible index constituents. Eligible companies are ranked according to their ratio of price/fair value and only the most undervalued companies are included in the Index. TECH currently holds positions in 31 companies, of which 20 are showing fair value above current market price (Chart 1). The weighted-average discount to fair value across the portfolio is 6.6% as at the end of April. This compares with a 5.5% weighted average premium to fair value across the Nasdaq 100(2). Further, companies that fall into the bottom 20% based on price momentum are screened out to ensure that the Index is not mistaking negative sentiment for value. ➢ Quality TECH invests only in quality companies and does this by screening firms according to their Morningstar Economic Moat Rating. An economic moat, as the name suggests, is something inherent in a company’s business model that defends its market position and cannot be easily replicated by competitors. It is the source of their competitive advantage and only well-established, high quality businesses achieve moat ratings. Wide Moat companies are the highest rated and are deemed able to maintain above average returns for the next 20 years. Narrow Moat companies are the next highest rated at should maintain excess returns for at least 10 years. TECH currently holds 12 Wide Moat companies including Adobe and Salesforce and 19 Narrow Moat companies including Computershare and LINE. ➢ Global Diversification The Index selects between 25 and 50 stocks from across global developed markets and equally weights them on a quarterly basis. Diversification benefits arise from the number of stocks chosen and the fact the they are drawn from an international universe. TECH currently holds stocks from the U.S., Japan and Australia. The equal weighting scheme is designed to both limit excessive exposure to the mega-cap names and to provide a greater opportunity for smaller companies to meaningfully contribute to performance. How has TECH performed? Chart 2 and Table 1, below, show the performance of TECH relative to a selection of prominent ETFs that offer technology-related exposures. These funds include Nasdaq 100 trackers listed in Australia and the U.S. (NDQ and QQQ respectively), a fund tracking the broad, market cap weighted S&P Global IT Sector Index (IXN) and the largest U.S. technology sector ETF (XLK). Returns are in Australian dollars and are net of fees. Since its inception on 7th April 2017, TECH has returned 30.1% p.a., which is 3.5% p.a. ahead of XLK and 6% p.a. ahead of the two Nasdaq 100 ETFs. Performance Without Taking More Risk Not only has it performed strongly, it has achieved its performance without taking undue levels of risk – it’s volatility since inception ranks fourth-lowest amongst the five funds shown. IXN, which holds close to 120 stocks compared to TECH’s 31 at present, has been about 1% p.a. less volatile. Performance During the Recent Market Correction Chart 3 shows the performance of the same five ETFs since the end of Q3 2018, which encompasses both the period of market volatility seen in the last quarter of the year and the subsequent recovery in 2019 to the end of April. Over that period TECH returned a total of 12.2%, which is more than double the return of the Nasdaq 100 funds and over 4% ahead of the next best performer, XLK. TECH’s maximum drawdown over the period from the end of September 2018 was 17.4%. This was almost 4% ahead of the next best fund, IXN, which dropped 21.4% over the period. In the recovery since Christmas, TECH returned 35.8%, which ranks second amongst the funds, behind only XLK, which rose 38.1% to the end of April. Summary The ETFS Morningstar Global Technology ETF (TECH) affords investors a simple solution to allocate assets to the technology sector in an intelligent way. This fund has been designed to provide pure exposure to the sector with stock selections seeking to choose a diversified portfolio of companies that have a competitive advantage over others operating in the field. Sources: 1 Bloomberg data as at 30 April 2019. The Information Technology sector contributed 13.2% of the 5-year total return of 46.4% of the iShares MSCI World ETF as a proxy for the global equity market. 2 Morningstar Direct as at 30 April 2019. Based on Morningstar analyst fair value ratings, which are available for 97.3% of the market capitalisation of the Nasdaq 100 index.
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.
Apr 30, 2019
This week's highlights Equity markets rose last week on strong U.S. corporate earnings, particularly across technology, communication and consumer sectors. BetaShares Global Cybersecurity ETF (HACK) was the top performing fund for the week and ETFS Morningstar Global Technology ETF (TECH) was also amongst the top performers. Healthcare and biotechnology funds (IXJ, CURE and DRUG) also performed well. China ETFs (CNEW and CETF) declined as economic stimulus expectations receded. Precious metals all rose last week, with ETFS Physical Palladium ETF (ETPMPD) up 4.2%, while the broader commodity universe (QCB) fell. The US dollar rose amongst most majors, including a 1.5% gain against the Aussie. Total flows into domestically domiciled ETFs were $108m for the week, while outflows totalled $93m. The biggest inflows were into Australian fixed-income funds including BOND, IAF and AAA. Despite inflows into IOZ, S&P/ASX 200 (and similar) funds saw net outflows of close to $40m. STW and BOND were the most traded funds last week. ETFS Morningstar Global Technology ETF (TECH) has posted a strong 26.9% total return since the start of 2019, and is now close to 10% above its previous highs in September 2018.
Apr 24, 2019
This week's highlights Equity markets mostly rose last week on a strong start to the U.S. earnings season and positive economic data in both the U.S. and China. Financials had a strong week with domestic ETFs (MVB, OZF and QFN) and global fund BNKS all amongst the top performers. China and Taiwan ETFs (CETF and ITW) returned in excess of 2% for the week, while technology and industrial heavy robotics-focused funds, RBZT and ROBO also posted strong performances. VanEck Vectors China New Economy ETF (CNEW) is the top performing ETF in 2019-to-date, returning 39.1%. Resource sector funds (OZR and QRE) as well as global gold mining funds (MNRS and GDX) lagged for the week. Global healthcare sector ETFs (IXK, DRUG and CURE) were the poorest performers on investor concerns relating to U.S. drug pricing reforms. Total flows into domestically domiciled ETFs were $119m for the week, while outflows totalled $27m. The biggest inflows were into broad-based Australian and U.S. equity funds (STW and IVV). Fixed income funds also attracted significant attention with ILB, IAF, CRED, AAA and BNDS all seeing net asset growth. The biggest outflows for the week were from domestic cash (ISEC), leveraged domestic equities (GEAR) and Europe (IEU). STW and AAA were the most traded funds last week, while USD and VAF saw above average volumes. ETFS ROBO Global Robotics and Automation ETF (ROBO) has posted a strong 24.9% total return since the start of 2019, and is now close to surpassing its September 2018 highs prior to the sell-off and market volatility in Q4 last year.
Apr 16, 2019
This week's highlights The top performers for the week were dominated by Australian Property and Australian Equity Geared ETFs. The SPDR S&P/ASX 200 Listed Property Fund (SLF) was the best performer returning 2.3% closely followed by BetaShares Geared Australian Equity Fund (GEAR) which returned 2.2%. The worst performers over the week were Healthcare and Biotechnology ETFs. ETFS S&P Biotech ETF (CURE) was down 5.2% and the iShares Global Healthcare ETF (IXJ) was also down 3.4%. Looking slightly longer term. Year to date the best performers are now spread across Geared Equity, Oil and Chinese exposures. BetaShares Geared US Equity Fund - Ccy Hedged (GGUS) up 38.9%. The worst performers are strong bear equity funds. Over twelve months ETFS Physical Palladium (ETPMPD) remains the best performer returning 53.7%. The worst performer is BetaShares US Equities Strong Bear HF - Hedged (BBUS) down 25.3%. Inflows for the week totalled $213 million and outflows were $13 million. The inflows were dominated by three products, BetaShares Australian High Interest Cash ETF (AAA), SPDR S&P/ASX 200 Fund (STW) and BetaShares Australian Bank Snr Floating Rate Bond ETF (QPON).
Apr 09, 2019
This week's highlights The top performer over the week was ETFS Physical Platinum ETF (ETPMPT) returning 6.2%. Closely followed by VanEck Vectors China AMC A-Share ETF (CNEW) up 6% and robotics and automation ETFs such as ETFS ROBO Global Robotics and Automation ETF (ROBO) up 5.4%. The weakest performer over the week was BetaShares Strong Bear Hedge Fund ETF (BBUS) returning -4.8%. Australian property ETFs also fell over the week with the SPDR S&P/ASX 200 Listed Property ETF (SLF) returning -3.2% and VanEck Vectors Australian Property ETF (MVA) fell -3.3%. YTD Chinese equity ETFs such as CNEW are up 42.2% and CETF up 37.5%. Long oil, geared equity funds and technology ETFs have also performed well with the ETFS Morningstar Global Technology ETF (TECH) returning 20.4%. ETFS Physical Palladium ETF (ETPMPD) is still the best performer over 12 months up 59.6%. Flows for the week were dominated by domestic equity, cash and fixed Income ETFs. IOZ saw net inflows of $26 million. The ETF market as a whole saw inflows of $154 million and outflows of $29 million.
Apr 08, 2019
Product in Focus: ZUSD: ETFS Enhanced USD Cash ETF Most portfolios hold cash to provide liquidity and downside protection Investors can seek to increase the return on their cash allocation using ZUSD Current US rates are significantly higher than Australian rate The deposit rate of ZUSD is currently 2.36% (as of 7 April 2019), enhanced by holding funds in deposits ranging from overnight to 3 months Cash Is King Defensive assets such as cash hold an important place in portfolios not only for liquidity but also downside protection. When you look at the typical asset allocation ranges for the five main risk profiles it’s clear what a critical part cash plays in a portfolio; now more than ever with many deeply concerned about the end of the equity cycle. However, many Australian investors only consider cash as AUD cash. This is understandable, but cash balances should be diversified in the same way as equities and fixed income. This gives the benefit of both diversification and, often, better yields. The ETFS Enhanced USD Cash ETF (ZUSD) achieves this for the low cost of 0.30% p.a. The United States Of Play The Federal Reserve has two main objectives. They are: Low and stable inflation over the long term (a target of 2% in the U.S) Full employment With both objectives looking stable in the current US economic environment Powell looks to be fulfilling his mandate and this has been reflected in the current Fed Target rate - set at a range of 2.25% to 2.5% - giving the market a strong indication that rates are likely to be unchanged for the remainder of the year and if on what looks like to be a small chance there is a change, it is likely to be in the form of a cut. He is unphased by short term misses of inflation targets and concentrates on long term trends. This resonates with his recent statement (March 2019) about the use of Monetary policy, he stated that: “We don’t see data coming in that suggest that we should move in either direction. They suggest that we should remain patient and let the situation clarify itself over time.” The Fed And The Reserve – Are They Kicking Goals? The current US yields are higher than the equivalent Australian duration. As you can see in the chart above the 10-year yields on government bonds are over 50 basis points better in yield terms in the US than Australia right now. Even with the yield curve displaying inverted characteristics, shorter duration US yields are better than the Australian equivalent. Current Market Deposit Rates For US And Australian Cash The cash rates on offer on US cash deposits are significantly higher even in the scenario that the RBA raises rates and the Federal Reserve holds. Even in the unlikely event that the RBA has consecutive increases (given inflation looks stable and economic growth looks late in the cycle) to the cash rate and the Fed held rates constant, the cash deposit rates on offer to investors could remain in favour of those with US deposits. In the graph below the spread between US and Australian deposits has been more beneficial to US deposits since March 2018. Product Solution Investors holding US Dollar Cash should be aware of the benefits of the ZUSD - ETFS Enhanced USD Cash ETF that achieves the following: Exposure to US dollar cash Enhanced yield Quarterly distributions ZUSD makes use of higher yielding deposits out to a term of 3 months in duration to help enhance the yield for investors in the fund. Using a combination of “at call”, 1M and 3M duration deposits ZUSD is designed to give investors an enhanced US dollar cash position rather than just holding exposure to the physical US dollar. Investors should consider diversifying their cash positions by holding non-domestic cash in addition to Aussie dollars via ZUSD.
Apr 02, 2019
This week's highlights The top performer over the week was ETFS S&P Biotech ETF (CURE) which ended the week up 2.9%. BetaShares Geared US Equity fund (GGUS) was up 2.5% and iShares products Core S&P Small Cap and Core S&P Mid Cap were both up 2.2%. Precious Metals, Miners and Agriculture ETFs were the worst performers over the week. ETFS Physical Palladium ETF (ETPMPD) ended the week down -10.7% and ETFS Physical Precious Metals Basket (ETPMPM) was down -4.1%. BetaShares Agricultural ETF (QAG) was down -3.2%. VanEck Vectors China New Economy ETF (CNEW) remains the best performer over the year to date. Followed by geared equity and oil ETFs. The worst performers year to date are BetaShares Bear and Strong Bear products. Looking longer term ETFS Physical Palladium ETF (ETPMPD) remains the best performer returning 54%. Infrastructure and property ETFs such as the AMP Capital Global Infrastructure Fund (GLIN) and ETFS Morningstar Global Technology ETF (TECH) rounded out the top 10. Top inflows for the week were seen by BetaShares Australia 200 ETF (A200) with $118.1 million of inflows. The market overall saw $207 million of inflows and $19 million of outflows for the week.
Mar 26, 2019
This week's highlights Last week saw mixed results for Australian listed ETFs as markets digested the Fed’s stance on interest rates. VanEck’s China New Economy ETF (CNEW) continued its strong YTD performance up 4.6% for the week. Whilst BetaShares’ Global Gold Miners ETF (MNRS) returned 3.1% and ETFS Physical Platinum (ETPMPT) rounded out the top three best weekly performers. The top performers over the previous 12 months are still ETFS Palladium (ETPMPD) up over 70%. Followed by domestic and international property ETFs; GLIN, VAP and SLF. Resources ETFS also featuring in the top ten for the week were OZR and QRE. Domestically domiciled ETFs saw total flows in of $A127 Million for the week and flows out of $A162 Million. The best flows for the week were seen across local beta ETFs A200 and IOZ with a cumulative flow of over $A40 Million. Fixed interest ETFs continued their steady positive flows over the week. FLOT, PLUS and CRED all saw inflows. The largest outflow for the week was from iShares IVV, which saw an outflow of over A$43 Million. Looking at turnover, unsurprisingly broad-based ETFs and cash products topped Average Daily Traded Value metrics for the week and also YTD.
Mar 19, 2019
This week's highlights Risk-on sentiment returned last week as U.S.-China trade tensions cooled. Energy and technology sectors outperformed. ETFS S&P Biotech ETF (CURE), NDQ, RBTZ and FUEL were amongst the top performers for the week. China-focused funds (IZZ and CNEW) outperformed following strong economic data. ETFS EURO STOXX 50 ETF (ESTX) returned 3.2% as the UK Parliament voted against a no-deal Brexit. The U.S. dollar weakened last week with USD, ZUSD and YANK all amongst the poorest performers. Australian banks also underperformed with QFN, OZF and MVB all dropping more than 1%. Total flows into domestically domiciled ETFs were $165m for the week, while outflows totalled $81m. The biggest inflows were into U.S. equity funds (IVV and IJR) along with global ex-U.S. equities (IVE) and bearish Australian equities (BBOZ). BetaShares Australian High Interest Cash ETF (AAA) saw the bulk of the week’s outflows. IVV and AAA were the most traded funds last week, while IJR, IVE and UBA saw above average volumes. ETFS S&P Biotech ETF (CURE) posted a positive return of 4.9% for the week, taking its total return since inception (8 Nov 2018) to 11.5% and its gain from the bottom of the market in December to 38.2%.
Mar 14, 2019
Europe Stacks up Despite Brexit Product in Focus: ETFS EURO STOXX 50 (ESTX) Brexit uncertainty has impacted on investor sentiment towards Europe . However there are multiple indicators that the negativity around the rest of Europe has been overdone . EURO STOXX 50 up 9.4% year to date in line with S&P 500 . Europe will always be a core part of investor portfolios. Perhaps now is a good time to allocate? Uncertainty surrounding the protracted Brexit negotiations has seen many investors shy away from European equity markets in favour of higher returns in the US. Yet, with the US economy looking increasingly vulnerable to a slowdown, it might be time for your clients to refocus their sights on Europe – 20% of the world’s GDP. Why have Australian Investors Been Wary of Investing in Europe? Economic conditions in Europe have been surprisingly resilient throughout the political to-ing and fro-ing that has accompanied Brexit. European stock prices, however, have lagged their US counterparts. In 2018, the primary benchmark EURO STOXX 50 Index fell by around 14.3%, compared to a decline of just 6.2% by the S&P 500 during the same period. Poor performance by banking and auto stocks due to jitters around interest rates and tariffs, respectively, were the primary factors depressing European markets last year. Investor sentiment on Europe has been dampened by a range of factors. The cloud over Brexit, and its likely impact for the UK and continental Europe, is the obvious culprit. Ongoing budgetary conflict between Italy and the European Union, fears of an escalation in global trade wars and speculation on when the European Central Bank will raise rates, have also weighed heavily. But Do These Fears Stack Up? So far in 2019, it is a different story. The EURO STOXX 50 is up 9.4% year to date, tracking similarly to the S&P 500 (also up 9.4%) and relative valuations look more attractive. The euro is also approaching two year lows, which could provide a boost to Europe’s export sector. There are also suggestions that underlying economic conditions in the powerhouse economies of Europe are stronger than sentiment would suggest. This view is supported by the release earlier this month (March) of the Markit Eurozone Composite PMI numbers for February which were revised upwards to 51.9, the first increase (albeit slight) in private sector activity in three months. The PMI index tracks business trends across manufacturing and services based on data from over 5,000 companies. Another sign that the negative sentiment around Europe might have been overdone is the Citibank European economic surprise index. This index (which measures data surprises relative to market expectations) while still in negative territory, has been ticking upwards since the beginning of the year. Emotions Do Not Equal Facts The tendency for sentiment to run at odds with economic reality was raised recently by Martin Beck, chief economist at Oxford Economics. He spoke of the “the difficulty of separating emotion from hard economic developments in driving survey responses” during times of high uncertainty. A number of factors underscore the view that Brexit uncertainty is having a disproportionate impact on investor sentiment. Unemployment across Europe continues to fall and is at 10 year lows, wages growth has picked up and German retail sales rebounded in January, rising more than 3%. ….And What About BREXIT So how great are the Brexit risks for European stock performance? Certainly the economic fortunes of the UK are deeply entwined with those of the EU. The UK is among the EU’s three largest trading partners, accounting for about 13% of its trade in goods and services. While Brexit uncertainty has been damaging for both the UK and the Eurozone, the worst case ‘no deal’ scenario is likely to hit UK companies much harder than their European counterparts. The IMF has forecast that a no deal Brexit could result in a 4% hit to the UK’s GDP BY 2030 should Britain end up adopting the default World Trade Organisation rules for its trading relationships with the EU. The two countries with the largest weighting in the EURO STOXX 50 index, France and Germany by comparison are expected to suffer declines of only 0.2% and 0.5% of GDP, respectively. Meanwhile, a more benign Brexit scenario preserving access to the single market but not membership of the customs union would have only “negligible” impact on output and employment for the EU, according to the IMF. The ultimate consequences of Brexit for both the UK and Eurozone countries, however, are likely to take many years to materialise and will depend on whatever shape any eventual deal takes. Europe Without the UK - ETF Securities’ EURO STOXX 50® ETF As with any late cycle investment strategy, the key to any European foray is to focus on quality companies with strong earnings track records. To this end, Europe offers some of the world’s most prestigious blue-chip names. The EURO STOXX 50, includes the 50 largest and most liquid stocks operating in the Eurozone. The top 10 stocks in the EURO STOXX 50 Index (which is updated annually) are Total, SAP, Sanofi, Linde, Allianz, LVMH Moet Hennessy, Siemens, Unilever, ASML Holdings and Banco Santander. For investors looking to gain exposure to Europe, exchange traded funds offer a way to gain widespread diversification at a low-price. The ETFS EURO STOXX 50® (ESTX) offers broad based exposure to the 50 largest companies across the Eurozone by tracking the performance of the EURO STOXX 50 Index. For the year to date, ESTX is up 8.0% (in AUD). Source: Bloomberg data as at 11th March 2019
Mar 11, 2019
This week's highlights Defensive sectors outperformed last week as most global equity benchmarks sold off. Gold mining ETFs (GDX and MNRS) and domestic real estate ETFs (MVA, SLF and VAP) were all amongst the week’s top performers. High beta funds including CURE, ROBO, HACK and RBTZ as well as Asia-focused ETFs (HJPN and IKO) were amongst the underperformers, all falling by more than 3%. Precious metal ETFs all declined, with platinum (ETPMPT) posting the biggest drop for the week. Total flows into domestically domiciled ETFs were $165m for the week, while outflows totalled $32m. The biggest inflows were into iShares Core Cash ETF (BILL) and iShares Global Consumer Staples ETF (IXI), while there were significant inflows into geared-short Australian equities (BBOZ) and outflows from geared-long Australian equities (GEAR). BILL and IXI also ranked highly in the most-traded ETFs for the week. VAS was the most traded fund for the week, while STW saw significantly below average turnover. ETFS Global Core Infrastructure ETF (CORE) posted a positive return of 0.7% for the week and is amongst the top performers on a 12 month basis, with a total return of 20.9% over a volatile period.
Mar 05, 2019
This week's highlights China A-shares posted big gains last week as the U.S. announced it would delay planned tariff increases. CETF and CNEW returned 7.1% and 6.1% for the week respectively. European equities also rallied as the prospect of a no-deal Brexit lessened. ETFS EURO STOXX 50 ETF (ESTX) returned 2.3%, BetaShares British Pound ETF (POU) gained 2.0%. ETFS S&P Biotech ETF (CURE) was the week’s top performing ETF, returning 7.6% and is now up 26.2% year-to-date. Commodity ETFs were mixed with gold, silver and oil declining, while platinum and palladium rose strongly. Gold mining ETFs, GDX and MNRS, were the poorest performing ETFs for the week. Total flows into domestically domiciled ETFs were $181m for the week, while outflows totalled $50m. Fixed income funds IGB, IHCB, AAA, ILB and QPON all saw strong inflows. The week’s biggest outflows were from STW and GOLD. Trading volume was dominated by the usual suspects; AAA, STW, VAS and IVV, with above average trading seen in IGB, GOLD and IHVV. ETF Securities’ “Future Present” range of funds has continued its strong start to 2019 with CURE, ROBO and TECH all returning in excess of 17% year-to-date and ACDC up 7.3%.
Feb 25, 2019
This week's highlights Globally, Chinese stocks rebounded last week as well as throughout Asia. Reporting season continued to see mixed results for Australia and the U.S. VanEck’s China focused ETFs CNEW and CETF lead the performance tables for the week. The ETFS Physical Platinum (ETPMPT) was the top performing commodity ETF for the week. Global and domestic bear products were the worst performers over the week as global and domestic markets continued their upward trend from January’s strong rally. Looking longer term, ETFS Physical Palladium (ETPMPD) remains the best performer over 12 months with 57.1% return. The physically backed metal has now reached over US$1,400/oz. Total flows for the week were dominated by cash and fixed income products including AAA, IAF and PLUS. With the ETF market seeing positive inflows of $50.3 million . Trading volumes were again highest among beta ETFs, with Magellan’s MGE making the top 10 for the week.
Feb 19, 2019
This week's highlights Global stocks gained last week with energy, industrials and materials sectors outperforming as U.S./China trade talks progressed. VanEck Vectors China New Economy ETF (CNEW) and ETFS ROBO Global Robotics and Automation ETF (ROBO) were the top performing unleveraged equity funds for the week. High growth plays including RBTZ, CURE and IJR also posted strong gains. Domestic financial sector ETFs were amongst the week's worst-performers as the post-Royal Commission bounce receded; MVB, OZF and QFN all dropped more than 1.4%. Commodity ETFs were mixed with OOO returning 5.4% on reports of lower global oil production. Precious metals mostly declined modestly, with the exception of palladium (ETPMPD), which continued to hit new highs on growing demand and tight supply. Total flows into domestically domiciled ETFs were $54m for the week, while outflows totalled $22m. The week's largest inflows were into a mix of funds including CNEW, BBOZ, HBRD and FAIR. The largest outflows were from GEAR, IEU and IJH. Trading volume was dominated by the usual suspects; STW, VAS, IVV and AAA, with above average trading seen in NDQ, BBOZ and QOZ. ETFS S&P Biotech ETF (CURE) continues to be 2019’s top performing unleveraged equity fund, having gained 18.6% YTD.
Feb 18, 2019
Here’s the Buzz around Megatrends Products in Focus: The ETF Securities Future Present Range Q4 2018 saw high levels of volatility that particularly affected the tech sector and high beta areas of the market . YTD performance in 2019 has seen a rebound of many of these stocks . In this article we explore some of the key drivers of growth in the future . In the long term there is a positive outlook for technology, robotics, battery tech and biotechnology. At ETF Securities, we often talk about megatrends; disruption, displacement, game-changing and revolutionary technologies. Whilst it is easy to become cynical about the overuse of these terms, it’s clear that the pace of change is accelerating with no signs of slowing. Since 1956 there has been more than a trillion-fold increase in computing power where today the power of the iPhone 6 (an already outdated technology) could theoretically guide 120 million Apollo 11 rockets at once. Taking a step back, the greatest driver of this advancement is simply the enormous expansion in computing power. We now have capabilities to capture and analyse immense quantities of data, and this knowledge is being applied to a wealth of areas, with many of these technologies previously restricted to the realms of science fiction. The ETF Securities Future Present range gives investors a way to access disruptive technologies in a diversified manner. The range includes four funds targeting different sectors that are looking to have a greater presence in the future: TECH: ETFS Morningstar Global Technology ETF Once seen as a highly speculative investment, technology has now firmly cemented its place at the top of the S&P 500. It is fair to say that most people are highly dependent on leading tech firms that have become exceedingly integrated into our lives. We wake up, check the weather on our Apple iPhone, cycle to work on that (pricey) Cannondale and track the ride on our Garmin. Once at the office, the computer is booted up and Microsoft Office provides the tools to get us through the day. These technologies are ubiquitous and as such it is important to know the different ways of gaining exposure to the companies behind them. TECH holds a basket of 32 global technology stocks that have been identified using Morningstar’s moat methodology, meaning they have a competitive advantage over other similar businesses. With Morningstar’s active influence in this fund, it has outperformed the Nasdaq 100 since it was launched in April 2017. ROBO: ETFS ROBO Global Robotics & Automation ETF While the tech sector is dominating the present, it’s robotics, automation and AI (RAAI) that looks set to dominate the future. The outlook for growth in RAAI looks bright and with recent volatility providing increasingly attractive valuations in this sector, is now the time to consider to invest in this thematic? This year industry experts are pointing to improvements in network capabilities, particularly the roll out of 5G networks, aiding growth across the board, with the upgrade from 4 or 4.5G yielding as much as 10-100 time improvements in network speeds. These enhancements are instrumental in enabling the development and implementation of other technologies. Can you imagine using Netflix in the days of dial-up internet? Further penetration of manufacturing robots is also expected to occur as the automation of the workforce continues. Today’s China has approximately 1 robot per 100 manufacturing workers, with huge scope for growth if it’s to reach ratio’s in line with Germany and South Korea’s 6 per 100. These robots are performing monotonous tasks with high levels of precision and increasingly lower costs than their human counterparts, meaning companies will need to keep up with the levels of automation their rivals are using to keep up with the competition. ACDC: ETFS Battery Tech & Lithium ETF Global climate change and the move towards renewable energy is one of the most pressing issues of today and one of the key drivers of our success in addressing this issue will be in the development of energy storage. Imagine a world where battery technology is efficient enough to fly planes and feed power stations – this is the world companies behind this technology are striving for, and we’re already on our way with the explosion of electric vehicle development. But it’s not just electric vehicles making advances. In classic Musk fashion, Elon managed to make batteries the talk of the town in 2018 with his 100-day delivery of the Hornsdale Power Reserve battery in South Australia, currently the largest in the world. This drew attention for the necessity of pairing renewable energy generation with practical storage solutions. Whilst Tesla has had the first-move advantage in the electric vehicle (EV) market, it is rapidly being chased by established car manufacturers like BMW, Volkswagen and Nissan, who have equally ambitious goals to capture the growing consumer demand for green-transport. JP Morgan project EVs and Hybrid Electric Vehicles (HEVs) will account for 30% of all vehicle sales by 2025. CURE: ETFS S&P Biotech ETF Whilst biotechnology is arguably one of the oldest forms of technology, its prospects for future development are high. Since the first smallpox vaccine was administered in 1761, there have been huge advances in the biotechnology field. The sequencing of the first human genome in 2003 enabled a plethora of new biotech drugs to be developed. DNA sequencing has created hope for those previously suffering incurable diseases and has provided a quality of life where it was previously lost. At the time of writing 67 of the 119 stocks in CURE are either researching or producing diagnostic tools or drugs that treat cancer. Therapies are being developed for psychological disorders, inoperable tumours, chronic pain, hereditary diseases and degenerative illnesses. As an industry that is renowned for its volatility, biotechnology can be a particularly difficult sector to choose a winner. For the uninitiated, it is a realm full of highly specific medical jargon, tied up with regulatory barriers and inexplicable results to clinical trials. This is why CURE offers an equal weight and broad exposure to the biotech sector. And whilst it is difficult to know who will be responsible for the next breakthrough treatment, what we do know is that people will always pay for healthcare, especially as our aging population grows. This is an industry where success does not just mean more dollars in the bank, but lives saved, and families kept together. The Future is Now The examples above provide just a glimpse into the full scope of innovation that is captured by the ETF Securities Future Present Range. The future is now, and the way we live and work will continue to be defined by these mega trends. Accessing these sectors through a diversified, equal weight ETF allows investors to take a view on what trends will dictate the times to come.
Feb 12, 2019
This week's highlights The fallout from the Royal Commission was the biggest driver of domestic equity returns last week as most financial stocks rebounded. Financial sector ETFs (OZF, QFN and MVB) all returned in excess of 6% for the week. Bank-heavy domestic dividend-focused ETFs also performed strongly with SYI, FDIV, RDV, ZYAU and VHY all returning more than 4%. Global equities were broadly negative for the week. BetaShares WisdomTree Japan ETF (HJPN), which fell 2.0%, was the poorest performing broad-based international equity fund for the week. The Australian dollar saw significant movement last week, dropping nearly 2c against the US$. YANK returned 6.3%, while AUDS fell 5.2%. Unleveraged funds ZUSD and USD both returned more than 2%. Precious metals continued to outperform, with ETFS Physical Gold (GOLD) up 2.1% and ETFS Physical Palladium (ETPMPD) adding a further 4.3%, taking its 12 month total return to nearly 55%. Oil declined, with OOO dropping 3%. Total flows into domestically domiciled ETFs were $87m for the week, while outflows totalled $61m. The week’s largest inflows were into VanEck’s domestic property and equally-weighted equity funds (MVA and MVW), while the biggest outflows were from QPON and A200. Vanguard Australian Shares ETF (VAS) was the most traded ETF last week, well-exceeding its long-term average turnover. Vanguard MSCI Index International Series (Hedged) (VGAD) also saw notable activity. Three of ETF Securities’ Future Present range of ETFs (CURE, TECH and ROBO) have returned more than 10% YTD in a sign that growth stocks are returning to favour.
Feb 05, 2019
This week's highlights Mining and resources stocks rallied strongly last week. VanEck Vectors Gold Miners ETF (GDX) was the top performing fund for the second week running, returning 5.1%, followed closely by BetaShares Global Gold Miners ETF (MNRS). Domestic resource sector ETFs (QRE, OZR ad MVR) were also amongst the top performers. Domestic financial sector ETFs fell in advance of the release of the Hayne Royal Commission findings this week; MVB, OZF and QFN all dropped more than 3.5%. Commodity ETFs generally had a strong week with oil (OOO), hedged gold (QAU) and silver (ETPMAG) all amongst the top performers. All five ETF Securities’ precious metals funds posted positive returns for the week. Total flows into domestically domiciled ETFs were $193m for the week, while outflows totalled only $10m. The weeks largest inflows were into domestic equities (IOZ), A$ cash (BILL) and iShares Global Consumer Staples ETF (IXI). Major domestic benchmark ETFs dominated trading volume last week. IXI, IAF, BILL and IXJ all seeing above average trading levels. ETFS S&P Biotech ETF (CURE) has returned 13.0% in 2019 to-date, making it the top performing unleveraged equity ETF.
Jan 30, 2019
This week's highlights Global stocks were mixed last week with gold miners, real estate and non-Japan Asia outperforming. VanEck Vectors Gold Miners ETF (GDX) was the top performing fund for the week, returning 3.7%, followed by iShares MSCI South Korea Capped ETF (IKO) at 3.5%. Global energy and healthcare funds were amongst the poorest performers with FUEL, IXJ, CURE and DRUG all posting negative weeks. Australian financial sector ETFs also declined. Inflows were also mixed with money moving into both long and short domestic equity funds (BBOZ, STW and EX20), global infrastructure (IFRA) and multifactor ETFs (WDMF and EMKT). Outflows were primarily from domestic financial sectors (QFN), geared equity funds (GEAR and GGUS) and Europe (IEU). Both BetaShares Australian High Interest Cash ETF (AAA) and BetaShares Australian Bank Snr Floating Rate Bond ETF (QPON) saw significant trading volume last week, while volumes in major equity benchmarks were well below longer-term averages.
Jan 22, 2019
This week's highlights Global equities improved again last week led by the Financials sector. Geared Equity ETF (GGUS) and Finance Sector ETF (BNKS) led the way with gains on 6.9% and 4%. Oils strong start to the year continued up again last week. OOO returning 4.1% for the week and 18.2% year to date. Looking longer term, ETPMPD remains the best performer over 12 months with a return of 37.4%. With property, technology and infrastructure ETFs all posting double digit growth. In terms of net flows, domestic equity and geared funds had the most redemptions, whilst there were significant flows into sustainability ETFs.
Jan 21, 2019
Gold 2019 Outlook Gold had a positive return of 9.4% in 2018 2019 is looking to experience further geopolitical instability, particularly: US/China trade tension Continued uncertainty around Brexit Gold net non-commercial long contracts have been on the rise since October 2018 Does it take a market correction to see the value in gold? 2018 wrapped up in a storm of volatility. Markets up for the first three quarters and down thereafter through to late December. Consequently, leaving investors wary of what may be on the horizon. Though we have entered a fresh year, many of these volatility drivers still exist as they remain unresolved. Looking at the geopolitical landscape, 2019 is likely to present events that will continue to affect market sentiment. Trade tensions between the US and China remain, Brexit is fast approaching the original deadline and elections are upcoming in India, the EU and Australia, with all expected to play a role in shaping the year ahead. With this continued uncertainty, defensive strategies and diversification shall continue to be on the mind of many. How did Gold weather the storm? The tail of 2018 saw gold perform as a good hedge against equities. Whilst the S&P/ASX 200 dropped 7.8% from October to December end, gold netted a 9.6% gain in this same period (Figure 1), which indicates inclusion of gold into a portfolio for the period could have reduced volatility and downside risk Examining several major indices across 2018, ETFS Physical GOLD had a positive return of 9.4% whilst all major equities were in the red (Figure 2). Gold outlook for 2019 The outlook for 2019 performance will likely be impacted by a continuation of the global themes that dictated the close of 2018. In the World Gold Council’s “Outlook 2019: Economic trends and their impact on gold”, it has outlined three important drivers of gold demand: financial market instability, the impact of rates and the dollar and structural economic reforms The political instability that has enveloped the leading economies of the US and the UK is set to continue with markets responding to ongoing turmoil. The protectionist attitude of the US has encouraged inflation, with gold used by many to hedge against this. These movements have heralded a renewed interest in gold which can be seen on multiple fronts. Net positive flows into ETFs have occurred for the previous three months, though Asian markets (including Australia) have lagged Europe and America on this front. Futures have also pointed to change in sentiment towards gold. Net non-commercial long contracts have been on the rise since October 2018, reversing the downward trend seen throughout 2017 and most of 2018 (Figure 3). The bearish view of gold suggests that performance could be constrained by a strong US dollar and rising interest rates. Addressing these points; the significant price movements of the dollar in recent weeks makes the price outlook of the dollar particularly tricky to predict. Examining the relationship between gold and interest rates, these have seen a degree of positive correlation in the past although not to a particularly significant degree. Finally, economic reform is expected to continue across China and India in 2019. As the greatest consumers of physical gold (through both investment and jewellery), economic growth in these regions will likely impact the precious metal. Further economic development and particularly the increase of wealth in India and it’s growing middle class is likely to continue to drive demand. On balance key indicators that have dictated the previous performance of gold suggest that we are likely to see a continuation in the upward trend of both investment flows and price of gold. Investors wanting to access gold may be interested in the benefits of exposure through investing in gold miners’ equities. Whilst this strategy gives the potential to receive dividends it does not offer the same exposure of a physical gold ETF such as GOLD as the price changes in gold miners can be quite different from the movement of gold price. The mining industry has recently garnered attention due to large M&A movements. Significantly Goldcorp will be acquired by Newmont Mining in a US$10bn deal. Subsequent to this announcement Newmont’s share price dropped 11% overnight. For investors who are utilising gold as an event risk hedge, other factors such as M&A activity can have unexpected effects on gold miner’s share prices. Therefore, a direct exposure to physical gold will eliminate exposure to stock specific risks.
Jan 15, 2019
This week's highlights The S&P 500 returned its third straight positive weekly gain continuing a promising start to the New Year. Both ETFS S&P Biotech ETF (CURE) and Betashares Crude Oil ETF (OOO) were the top performers for the week and also the Year to Date. Geared Australian and U.S equity funds also had a strong week along with thematic ETFs ROBO and RBTZ. Looking longer term ETFS Physical Palladium (ETPMPD) ETF was the best performing ETF over the previous 12 months returning 33.9%. Domestic cash and equity products saw majority of the flows and turnover for the week and continued the trend so far for 2019. The biggest outflows for the week were for international equity exposures IEU and IVV.
Jan 08, 2019
GOLD 100% physically backed Highly recommended by Lonsec Recommended by Zenith Key features of Gold: Can materially reduce risk in portfolios The best-known hedge against the business cycle Outperformed cash since the 1800s Hedge against geopolitical events Global trends around Gold investment: Global Gold ETF investment flows have moved to positive for the first time since May 2018 Central banks have increased buying of gold to the highest level since the end of 2015 Gold is the world’s oldest financial asset and has been used for centuries in transactions and as a store of value. However, many Australian investors are hesitant to allocate assets to gold, with the lack of yield being a common concern. We believe investors should consider the role of gold in a portfolio, particularly with the recent volatility being experienced across the globe. Key features of gold 1. Gold can reduce the risk of a portfolio The most efficient portfolio is one that takes the least risk while making the highest return. Risk can be reduced by diversifying across and within asset classes based on low or negative correlations. Gold has low or negative correlations with traditional asset classes making it ideal as a risk reduction tool. 2. Gold has outperformed cash since the 1800s In a review of every major US asset class, Jeremy Siegel, a professor of finance at the University of Pennsylvania, found that gold provided investors with a real return of 0.5% from 1802 to 2016. He found that while gold was beaten by bonds and equities, gold outperformed cash, with cash delivering a negative real return of -1.4%. 3. Gold acts as a hedge against geopolitical events Gold has had an historical tendency to rise during times of crisis and turbulence. This means gold can provide something like an ‘event hedge’ – or the chance to reduce the impact of ‘black swan’ type events which, while relatively uncommon, can have a strongly negative impact on a portfolio. Taking the well-known example of the GFC (below) it can be seen that the difference between gold and the equity markets one year on from the credit crisis was 35% in favour of gold. Global trends of Gold investment Recent global movements have shown many investors are reallocating to gold. On this front Australia is lagging behind global trends with other regions showing a greater propensity for an allocation to gold. We have seen this increased appetite for gold emerging on multiple fronts: Gold ETF investment flows have moved to positive for three consecutive months (October-December) with 3% growth in ETF holdings in 2018 The total value of global gold backed ETF holdings in now over $100bn for the first time since 2012 Central banks have increased their buying of gold to the highest level since the end of 2015 What does gold look like in a portfolio? To demonstrate the effect of gold in a portfolio we have simulated the past performance of a series of Vanguard “LifeStrategy” funds with and without a 10% allocation to gold. Simulations were run over a 15-year period (since inception of ETFS GOLD). These funds provide an all-in-one portfolio made of globally diversified blends of equity and bonds (proportion equities & bonds indicated in charts below). In every case, the portfolio including a 10% allocation to GOLD outperforms and has lower beta and standard deviation indicating a lower risk. Based on this it’s clear gold does exactly what it’s meant to do from an investment perspective and we believe that many Australian investors are ignoring these risk reduction properties. Conclusion Gold is the oldest known store of value and has been continuously used for this function for centuries. We have demonstrated above the key features of gold that make it an appealing option for some investors. Gold’s low and negative correlations with other asset classes have seen it perform as an effective hedge in previous bear cycles and during global geopolitical events that have negatively affected other asset classes. Simulated data also demonstrates how this diversification can function in a hypothetical portfolio to reduce risk and increase returns.