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Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update
Top recommendations for March: Gold, US Treasuries, High Grade Credit, US Utilities, and Indonesia.
Recent market relief rally is not consistent with ETF flow trends
Since Feb 11, global equity markets experienced a relief rally of over 5% through the end of February. However the stock market hype was not enough to change investors’ sentiment as reflected in flow trends. Actually, although inflows into safe haven assets such as Gold, US Treasury, and IG Credit, and outflows from Equity both slowed down; the underlying trend of preference for defensive assets over riskier ones remained intact (Figure 1). Therefore we remain skeptic regarding the sustainability of the recent rally, and would rather wait for a clearer signal before calling for a switch back to risk-on mode.
Tactical positioning for March based on TAARSS
Overall we continue to see stronger support into defensive assets over risky assets.
For Global Equities we recommend to remain on the sidelines, or look for specific themes with attractive support such as Global Natural Resources.
For US equity prefer a sector approach. We again favor Utilities and Telecom for March. While for Intl DM equities we prefer Canada.
And for EM equities we prefer Indonesia and Latin America on recent support build-up.
In Fixed Income, prefer US Treasuries and IG credit over HY credit. In Commodities, prefer Gold on very strong support.
The Synthetic Equity & Index Strategy Team
Deutsche Bank – Equity Research
Indonesien kämpar med vikande efterfrågan från Kina
Indonesien kämpar med vikande efterfrågan från Kina och de låga priserna på landets primära export, råvaror som palmolja och kol. Det finns emellertid en uppsättning stimulanspaket som nyligen aviserats från landets president, Joko Widodo, vilka förväntas stimulera tillväxten i Sydostasien största ekonomi. För den som tror att dessa kommer att få effekt finns det en börshandlad fond, iShares MSCI Indonesia ETF (NYSEARCA: EIDO), som helt fokuserar på att replikera landets aktiemarknad.
Stimulansåtgärderna varierar från att skära energipriserna för företag och ge försäkringar till jordbrukare mot missväxt till att ge tillgång till subventionerade lån till löntagare på småföretag. Tidigare har Indonesiens regering försökt återuppliva landets ekonomi genom att underlätta tillståndsbearbetning och stabilisering av en svag rupier. Regeringens mål är att uppnå en BNP-tillväxt på 7 procent 2017 genom ökad satsningar på infrastruktur och accelerera inflödet av direkta utlandsinvesteringar. Denna siffra skall ställas i förhållande till Indonesiens sexåriga låg BNP-tillväxt på 4,7 procent för första kvartalet i år.
EIDO replikerar MSCI Indonesia Invest Market Index, som mäter utvecklingen av indonesiska-noterade aktier. Fonden är starkt viktad mot ekonomi vilket står för nästan 40 procent av denna börshandlade fonds tillgångar. EIDO har i skrivande stund cirka 300 MUSD under förvaltning, och det omsätts cirka 690 000 andelar per dag på NYSE. Förvaltningskostnaden för denna ETF ligger på 0,62 procent per år.
Sedan starten på 2015 har denna börshandlade fond stigit med mer än 25 procent. Det finns ytterligare två börshandlade fonder som erbjuder exponering mot Indonesien, Market Vectors Indonesia Index ETF (NYSEARCA: IDX) och Market Vectors Indonesia Small Cap ETF (NYSEARCA: IDXJ) vilka båda har gett sina andelsägare mer än 20 procent i värdeökning under 2015.
With oil prices staging a premature recovery, many investors are taking profit. Global oil supply has not yet tightened, pointing to a geopolitical premium on oil prices accounting for the recent price gains. We believe there could be a correction in the short-term, but prices will continue to rise once supply starts to tighten. Tightening supply has also driven tin prices higher and we expect a similar trend across most industrial metals this year. Falling energy prices has not reduced production costs for metals sufficiently to restore profitability and supply cuts are the likely course for most metals.
Profit-taking drives US$58.1mn out of long oil ETPs. With Brent and WTI oil prices bouncing a further 1.4% and 1.8% respectively last week, more investors took profit on their positions. Last week was the third consecutive week of outflows as the price of Brent and WTI have gained 16% and 22% respectively over that period. Recent gains however appear excessive given the fundamentals. The positive reaction to a slower inventory build in the US two weeks ago was somewhat premature, given that last week inventories grew at a quicker pace than expected. All indications point to OPEC continuing to produce more oil, with March output from the cartel surging 810,000 barrels per day. Geopolitical risk has added a premium to the oil price, with Saudi Arabia’s attacks on Yemen, threatening to destabilize the Bab el-Mandeb Strait, a narrow chokepoint between the Horn of Africa and the Middle East. The strait is a transit point for 3.8 million barrels per day of oil, or 4% of global oil supply. Any easing of the instability in Yemen could see the premium dissipate relatively quickly. Moreover, Saudi Arabia could continue to increase the amount of oil it produces, which would pull down prices. In March it increased oil production by 660,000 barrels per day. A short-term correction in oil prices could once again open up an opportunity to go long oil for many investors ahead of the next OPEC meeting in June, where we expect talk of modest cuts to production to help prices increase once again.
ETFS Daily Leveraged Nickel (LNIK) sees its highest weekly inflows since inception in 2008. LNIK received US$2.2mn of inflows last week, following the International Nickel Study Group’s April meeting in Lisbon where it predicted that nickel usage will increase to 1.94Mt in 2015 from 1.87Mt in 2014. At the same time it forecasts production will decrease to 1.96Mt in 2015 from 1.99Mt in 2014, helping to tighten the supply surplus this year.
ETFS Daily Leveraged Tin (LTIM) had its second highest weekly flow since inception in 2008. Sharp price gains attracted US$1.6mn of inflows into LTIM. With Indonesia’s largest tin producer cutting output by as much as 50%, tin prices accelerated last week, gaining 3.4%. Tin prices had slumped by more 35% in the past year, increasing the urgency to cut back on production by the largest producing country.
Key events to watch this week. The Federal Open Market Committee will meet this week to decide on interest rates. This will be last meeting before June and will not be accompanied by a press conference. The market will therefore remain very attentive to FOMC member speeches and public engagements to glean any information about the possible path of rate increases this year.
Video Presentation
Nitesh Shah, Research Analyst 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.
For more information contact
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
Important Information
General
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
This is a strictly privileged and confidential communication between ETFS UK and its selected client. This communication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute or copy this communication. Please notify the sender immediately if you have mistakenly received this communication. When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited.
This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.
This document may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.
Any historical performance included in this document may be based on back testing. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance.
Historical performance is not an indication of or a guide to future performance.
The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision.
ETFS UK is required by the United Kingdom Financial Conduct Authority (”FCA”) to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.
Risk Warnings
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.
Commodity ETP Weekly Prepare for Short-Covering Rallies
ETFS Daily Short Gold (SBUL) saw its highest redemption since inception.
Inflows of US$6.8mn for long agricultural ETP baskets indicates that investors see value in grains after falling to their lowest price levels since 2010.
ETFS Daily Leveraged Natural Gas (LNGA) saw US$4.6mn of inflows, the highest in 9 weeks, as storage values came under expectations.
Long nickel ETPs received US$1.4mn of inflows as the Indonesian government reiterated that the ore export ban from will remain.
Bargainhunting investors are beginning to be attracted by lower commodity prices, with positive flows into agricultural baskets and silver signaling a belief that the bottom is near. Nonetheless, most commodity prices continued lower in the past week and softer sentiment in some sectors prompted outflows. Gold remained under pressure last week, with all indications that the Federal Reserve’s policy stance will be tighter in 2015. Ongoing concern over the outlook for China also weighed on the performance of industrial metals and industrially-inclined precious metals. We believe that with speculative shorts across many commodities having risen to multi-period highs, the prospect for short-covering rallies is high. Over the coming weeks, investors are likely to start building long positions with most commodity trading at or near the cost of production.
ETFS Daily Short Gold (SBUL) saw its highest redemption since inception. After a protracted period of building up shorts on gold, investors pulled back as the price of gold approaches our estimated all-in cost of production and the widely watched support level near US$1,200/oz. US$47.7mn flowed out of SBUL, wiping out the seven months of flows into the short product. While investors continued to pare their long gold positions as well, with US$51mn leaving physical gold ETPs last week, taking further bets on a decline in price seems risky at this point.
Inflows of US$6.8mn for long agricultural ETP baskets indicates that investors see value in grains after falling to their lowest price levels since 2010. Marking the highest inflow in 9 weeks, we believe that sentiment is slowly turning. Investors have been buying wheat ETPs for 19 consecutive weeks now and there is a growing sense that all ‘good’ production news has now been priced in. Meanwhile sugar prices bounced up 6.6%, attracting a further US$0.9mn into ETFS Sugar (SUGA), marking 8 consecutive weeks of flows into the ETP. Sugar remains close to a 4-year low as the fifth consecutive year of surplus is expected this year.
ETFS Daily Leveraged Natural Gas (LNGA) saw US$4.6mn of inflows, the highest in 9 weeks, as storage values came under expectations. US natural gas stocks increased by 97 billion cubic feet in the week ending September 19. That compared with an expected increase of about 100 billion cubic feet anticipated by analysts and sent prices 1.6% higher last week. As we approach winter, seasonal demand for natural gas will rise. A failure to build inventory or an unusually cold winter like last year could be key catalysts for sustained price increases.
Long nickel ETPs received US$1.4mn of inflows as the Indonesian government reiterated that the ore export ban will remain. Indonesia, the world’s largest nickel producer, had implemented the ban in January this year and has unusually stuck to it in a bid to develop domestic smelting facilities. Nickel prices nevertheless fell, along with other industrial metals on the back of softer-than-expected PMIs and durable goods data.
Key events to watch this week. US payrolls will be the centre of attention this week as the market judges the capacity of the US economy to absorb an interest rate hike that will eventually follow when the Fed finishes its period of extraordinary monetary support. A strong reading is likely to be US dollar positive and weigh on commodities priced in the currency. After the lacklustre take-up of the TLTRO (the ECB’s form or quantitative easing), the market will be keen to hear President Draghi’s view of the programme at the ECB’s post-policy meeting conference.
Nitesh Shah, Research Analyst 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.
For more information contact:
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
Important Information
General
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
This is a strictly privileged and confidential communication between ETFS UK and its selected client. This communication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute or copy this communication. Please notify the sender immediately if you have mistakenly received this communication. When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited.
This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.
This document may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.
Any historical performance included in this document may be based on back testing. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance.
Historical performance is not an indication of or a guide to future performance.
The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision.
ETFS UK is required by the United Kingdom Financial Conduct Authority (”FCA”) to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.
Risk Warnings
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.
Nya ETF:er i förra veckan – Likaviktad Nasdaq-100 ETF & Indonesien Small Cap ETF
Nya ETF:er i förra veckan – Likaviktad Nasdaq-100 ETF & Indonesien Small Cap ETF. I förra veckan noterades sju nya ETF:er. Fem stycken i Tyskland (XETRA) och två stycken i USA (NYSE). Världens största ETF SPDR S&P 500 ETF parallell noterades på tyska XETRA i förra veckan. Kostnaden för att följa detta index sattes till låga 0.15 procent. Handlar man samma ETF i USA är dock kostnaden 0.0945 procent (net fee). Övriga intressanta lanseringar inkluderar en likaviktad ETF på Nasdaq-100 från Direxion. Likaviktade index brukar slå kapitalviktade index över tiden då en större andel allokeras till mindre bolag än vid ett likaviktat index.
Den mest intressanta lanseringen enligt min mening var dock Market Vectors småbolagsversion av den omåttligt populära Market Vectors Indonesia ETF (ticker IDX). Den nya ETF:en har det självklara namnet Market Vectors Indonesia Small-Cap ETF (ticker IDXJ).
