ETF investors miss out on yen performance

Laurent Kssis at LaBranche Structured Products Europe (LSPE) discusses European ETF trades for the week ending 18 March.

European investors may have chosen the wrong Japan ETF last week, as they flocked into euro and GBP denominated funds.

While the Nikkei rallied towards the end of the week, the yen depreciated, meaning yen-based funds performed better relative to their cross listings in other currencies. However, the majority of investors buying into iShares MSCI Japan - the week's most traded ETF with LSPE helping creations of $75m - failed to capitalise on this benefit.

Meanwhile, the iShares Nikkei 225 DE and Lyxor's Japan Topix were the second most traded ETFs on the primary market. Lyxor's fund alone saw trading volumes reach €128m, ending out the week with net creations worth €13m. Here, investors chose better, with creation orders on Lyxor's yen listing standing at $71m, against redemptions of $57m on the firm's euro version.

Elsewhere, ETFs tracking the DAX continued to see healthy interest, with iShares' fund reporting $250m worth of creation orders over the week. Emerging markets are still losing money, although iShares FTSE BRIC 50 bucked the trend somewhat, with primary orders of around $40m.

Our primary market volumes increased twofold last week, largely on the back of sizeable client orders, which regularly came in above the €20m mark. As a result, we saw some of the heaviest volumes ever in over-the-counter transactions, and not all from investors selling their holdings.

Overall we ended the week 3:2 in favour of creation orders on the primary market. This was largely due to activity across Japan funds, but also came from creation orders in Lyxor's EuroStoxx 50 and CAC 40 ETFs.

This week will largely focus on the UK, with the chancellor's budget, MPC minutes and CPI data all anticipated. This coming Friday will see the release of GDP data from the US.

This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.