ETF volumes drop despite equity rebound

Laurent Kssis at LaBranche Structured Products Europe (LSPE) discusses European ETF trades for the week ending 25 March.

Investors kept their hands off ETFs last week, with low daily trading volumes persisting despite a rebound in the equity market. Weekly volumes were down 10% on the Eurostoxx and 15% on the S&P against their six month average, even as the indices rose 4.3% and 2.7% respectively.

Across the market, flows moved out of ETFs targeting lower growth and into gold and silver ETPs, longer-term duration bonds, and funds aimed at higher inflation.

Gold ETPs attracted inflows of around $800m globally, while iShares' EuroStoxx Sustainability 40 and Stoxx Europe 600 ETFs saw redemptions worth $50m.

We also saw continuing demand for Russia, with three times the previous week's interest in the Lyxor ETF Russia, which reported total creation orders worth $125m. Japan ETFs did not see significant sellers, and we believe that many investors may have sold futures against their exposures.

Together, activity across emerging markets and MSCI Japan represented three-quarters of our total creation orders, while the iShares Barclays Capital Euro Corporate Bond ETF came to account for one in ten of our creations.  Overall our primary market volumes came out 3:2 in favour of creations, but were only half that of the week before.

Meanwhile on the secondary market, sellers marginally outweighed buyers, primarily due to strong volumes on Xetra. We helped OTC and on-exchange buyers in the iShares Dow Jones US Select Dividend (DE), in what seems to be preparation for the start of the US dividend season.

Commodities had a rather quiet week, although we did see large buyers in ETFS Natural Gas and ETFS Copper - which is hovering at an all time high - alongside sellers in energy funds such as EasyETF's S&P GSCI Capped Commodities ETF.

In fixed income, iShares Euro Inflation Linked Bond saw net sellers, in contrast to decent sized institutional buyers in db x-trackers iBoxx Global Inflation-Linked TR ETF.

The coming week will see the release of nonfarm payroll figures from the US on Friday, and could potentially see increased levels of volatility.

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.