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ETF Securities Weekly Flows Analysis – Commodity rally drives a mixture of profit-taking and position building
Gold ETPs see third consecutive week of inflows. Inflows of US$22.3mn indicate that investors are combining their bullish cyclical positions with strategic hedges. Despite the equity and cyclical commodity rally in the first two weeks of the year, there is reason for investors to remain cautious. The ‘Trump Rally’ could be fleeting. Although many of the President Elect’s policies appear pro-growth, there is little detail on how they will be implemented. The risk of disappointment is high. The US Dollar (DXY) has lost about 2% while gold has gained close to 5% year-to-date as the vagueness of Trump’s policies has unsettled some investors.
Profit taking in palladium ETPs see an outflow of US$117.7mn. Palladium has had a very strong start to the year – gaining close to 11% – which has erased most of the losses the metal sustained in December. Johnson Matthey expect mine supplies to remain flat this year while demand – primarily from the auto sector – will grow. As a result palladium will likely be in the sixth consecutive year of a supply deficit.
Industrial metals rally drives largest inflow into broad metal baskets since November 2016. A combination of a weaker US dollar (in which most commodities are priced) and strong Chinese commodity import data led metal prices to continue to rally last week. Investors bought US$23.3mn of industrial metal basket ETPs and a further US$10mn in individual industrial metal ETPs last week. The market has largely brushed off the lack of detail behind Trump’s infrastructure spending plans and the relaxation of some of Indonesia’s ore export ban.
Investors increase positions in short European equities by the most since September 2015. Inflows of US$5.0mn into short DAX ETPs and US$7.8mn into short FTSE100 ETPs shows that some investors are increasing contrarian positions following the strong equity rally. Meanwhile, the growing relevance of automation in a world where demographic aging and access to low cost migrant workers could become more difficult has led to rising investor interest in robotic equities. Last week’s inflows of US$10.2mn was the highest since October and marks the 18th consecutive week of inflows in ETFs capturing this theme.
Nitesh Shah, Director, Commodity Research at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).
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The products discussed in this communication are issued by ETFS Commodity Securities Limited (”CSL”), ETFS Hedged Commodity Securities Limited (”HCSL”), ETFS Hedged Metal Securities Limited (”HMSL”), Swiss Commodity Securities Limited (”SCSL”), ETFS Foreign Exchange Limited (”FXL”), ETFS Metal Securities Limited (”MSL”), ETFS Oil Securities Limited (”OSL”), ETFS Equity Securities Limited (”ESL”), Gold Bullion Securities Limited (”GBS” and, together with CSL, HCSL, HMSL, SCSL, FXL, MSL, OSL and ESL, the ”Issuers”) and GO UCITS ETF Solutions Plc (the ”Company ”). Each Issuer (apart from SCSL) is regulated by the Jersey Financial Services Commission. The Company is an open-ended investment company with variable capital having segregated liability between its sub-funds (each a ”Fund”) and is organised under the laws of Ireland. The Company is regulated, and has been authorised as a UCITS by the Central Bank of Ireland (the ”Financial Regulator”) pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2003 (as amended).
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None of the index providers of the Funds referred to herein nor their licensors make any warranty or representation whatsoever either as to the results obtained from use of the relevant indices and/or the figures at which such indices stand at any particular day or otherwise. None of the index providers shall be liable to any person for any errors or significant delays in the relevant indices nor shall be under any obligation to advise any person of any error or significant delay therein.
ETF Securities Weekly Flows Analysis – Weaker US dollar boosts precious metals
The gold price rose 1.4% on the week after the US dollar weakened following a somewhat dovish Fed minutes. Gold ETPs saw US$40.5mn of inflows last week. The minutes of the FOMC December meeting revealed that the Fed is optimistic about growth prospects for the US economy, giving more scope for rising interest rates. However, the FOMC continues to see risks to this outlook, notably regarding fiscal policy and the negative consequences of a stronger dollar. Overall, market participants revised rate hike expectations downward, suggesting the next rate hike would take place in June. The weaker dollar coupled with stronger US and Chinese manufacturing data also boosted platinum and palladium prices, which have gained 5.7% and 10.2% respectively last week.
Investors reduced positions in ETPs tracking long EUR/USD. The US employment report showed wage growth rising 0.4% over December – the strongest since 2009, despite the disappointing 156k job gains on the month. The mixed December US jobs report and Fed minutes halted the US dollar rise that started in November, prompting some investors to pull back their bullish bets. Short USD long EUR ETPs saw US$95.7mn outflows last week.
Crude oil ETPs experienced a US$17.9mn withdrawal after the US Department of Energy reported a massive rise of distillate inventories. The oil price moved slightly upward on the news that Saudi Arabia cut its crude oil production by at least 486k barrels a day since October. However, the oil price pared gains after the US inventory data showed an extra 18mn barrels to gasoline and diesel stockpiles last week. In addition, US natural gas and carbon prices both collapsed by 10.8% and 23%, respectively last week. The price declines were triggered by predictions of milder temperatures in the US, and a drop of EU carbon allowances in the EU Emissions Trading System (ETS).
What to watch this week. Investors will closely watch the industrial production data and employment figures for the Eurozone to gauge the effectiveness of the ECB’s monetary stimulus. Inflation data in China and US retail sales will also be monitored by market participants.
Morgane Delledonne, Fixed Income Strategist at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.
ETF Securities Research team ETF Securities (UK) Limited T +44 (0) 207 448 4336 E info@etfsecurities.com
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
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Any products referenced in this document are generally aimed at sophisticated, professional and institutional investors. Any decision to invest should be based on the information contained in the prospectus (and any supplements thereto) of the relevant product issue. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may valued in currencies other than those in which there are priced and will be affected by exchange rate movements. Investments in the securities which provide a short and/or leveraged exposure are only suitable for sophisticated, professional and institutional investors who understand leveraged and compounded daily returns and are willing to magnify potential losses by comparison to investments which do not incorporate these strategies. Over periods of greater than one day, investments with a short and/or leveraged exposure do not necessarily provide investors with a return equivalent to a return from the unleveraged long or unleveraged short investments multiplied by the relevant leverage factor. Investors should refer to the section entitled ”Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in any securities referenced in this communication. If you have any questions please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.
Sedan Donald Trump oväntat tog hem segern i det amerikanska presidentvalet i USA har vi sett enorma inflöden till börshandlade produkter världen över. Orsaken är framförallt att Trumps valseger fått börserna att rusa världen över.
Enligt data från Blackrock, så har globala ETP, som omfattar både börshandlade fonder och övriga typer av börshandlade produkter, attraherat nettoinflöden om 56 miljarder dollar under november 2016, det största inflödet sedan december 2014. Veckan som det amerikanska presidentvalet hölls omfattade de största flödena, nästan tre fjärdedelar av inflödena till de börshandlade fonder som investerar i aktier skedde den månaden när de amerikanska aktieindexen steg till nya rekordnivåer.
Amerikanska aktierelaterade ETFer var klara vinnare då de attrahera nya månatliga flödesrekord när investerarna satsade allt på ett kort (Trumpkort?), till exempel small caps, finanssektorn och industriföretag, sektorer som alla skall dra fördel av Trumps vallöften. Inflödena till den amerikanska large cap sektorn uppgick till 19,8 miljarder dollar, medan small caps såg inflöden om 10,5 miljarder dollar, ett nytt månatligt rekord. Finanssektorn såg inflöden om 8,3 miljarder dollar medan industrisektorn noterade nettoinflöden om 4,9 miljarder dollar.
Medan uppmärksamheten minskade för obligationsmarknaden ser vi emellertid att inflödet till räntebärande papper fortfarande är skyhögt. Det var en rekordmånad avseende inflöden till inflationsskyddade värdepapper, 2,4 miljarder dollar. De traditionella statsskuldväxlarna, US Treasury, såg däremot nettoutflöden på 2,0 miljarder dollar sedan placerarna bestämt sig för att Trumps valseger kommer att leda till högre räntor i USA i syfte att bekämpa de stigande inflationsutsikterna.
Guldpriset drabbades hårt av Trumps valseger, trots att prognoserna var att en vinst för republikanerna skulle leda till en ökad guldkurs. Vi såg utflöden om 4,5 miljarder dollar från de börshandlade produkter (ETP och ETC) som investerar i guld efter det att räntorna steg, dollarkursen stärktes mot övriga valutor och förutsättningarna för en ekonomisk tillväxt lett till ett minskat behov av en så kallad safe haven.
Om investerarna lockades av förutsättningarna på den amerikanska marknaden så var det tvärtom med Emerging markets, så kallade tillväxtekonomier, där de börshandlade fonder som investerar på aktiemarknaden i detta segment såg utflöden om 3,2 miljarder dollar. De börshandlade fonder som investerar i obligationer utgivna av dessa ekonomier såg utflöden om 3,3 miljarder dollar sedan dollarn steg på förhoppningar om högre räntor i USA.
Sedan årets början har den globala ETP-marknaden sett inflöden om 321 miljarder dollar, vilket är mer än för hela 2015. Totalt sett finns nu mer än 3 400 miljarder dollar investerat i börshandlade produkter världen över.
