2018 ETP flows pick up right where 2017 left off

ETF Securities – 2018 ETP flows pick up right where 2017 left off

Highlights

• Global equity ETPs garnered US$21.6mn buoyed by a synchronised global growth story.
• Gold ETPs received inflows of US$19.2mn led by higher gold prices, having gained support from a weaker US dollar.
• Outflows worth US$14.1mn from crude oil ETPs mark a continuation of last year’s trend of outflows.

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Gold ETPs received inflows of US$19.2mn, staging a strong start to the new year. Gold prices ended the week higher by 1% supported by a weak US dollar. While the rise in US payrolls missed estimates by a considerable margin of 42,000 workers in December, owing to a shortfall in the services sector, it is unlikely to be a significant shift in the overall trend. The US ADP employment data showed private employers added 250,000 jobs in December, marking the biggest monthly increase since March last year. The accomplishment of passing the US tax bill is also likely to benefit US corporate earnings. We continue to expect the Fed to hike in March. Moreover the December FOMC minutes released last week, highlight concerns of higher inflation expectations in 2018 stemming from wage growth. The likelihood of higher inflation should keep the Fed on track with its three rate hike projections in 2018 and is likely to be a headwind for gold prices going forward.

Global equity ETPs garnered US$21.6mn buoyed by a synchronised global growth story. Strong economic data in US, Europe and China has helped reinforce the positive sentiment helping global stock markets attain new highs. In addition, the cut in the US corporate tax rate has boosted expectations for corporate earnings that kick off this week.

Precious metal ETPs garnered strong inflows worth US$18.8mn. Palladium prices rose to US$1100 for the first time in 17 years, in continuation with last years trend. Fears of a supply shortage continue to drive palladium prices higher. However we expect to see its closely traded counterpart platinum outperform palladium, owing to its steep price discount and the strengthening European car market.

Crude oil ETPs saw outflows of US$14.1mn, extending last year’s trend of relentless outflows. Fears of political unrest in Iran disrupting oil supply coupled with OPEC’s high compliance with production cuts helped push Brent crude above US$68, its highest level since May 2015. Meanwhile positive economic data across the globe and severe cold weather conditions in the US sent WTI crude oil just shy of its 2015 high. Evident from the build-up in short positioning of crude oil ETPs, investors are increasingly becoming aware that current prices are unsustainable as the US continues to expand production and the unrest in Iran settles.

Diversified basket ETPs received US$12mn as major commodities kick start the year with a strong performance. The Bloomberg commodity spot index, known to track a broad basket of 22 major commodities, attained its highest level since 2014. The improving global growth story is benefiting the outlook for commodities and drawing investors into broad based diversified commodity baskets.

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