ETF Securities Weekly Flows Analysis – Industrial metal ETP inflows resume
Highlights
- Industrial metal ETPs saw their first inflows in four weeks
- Robotic ETPs saw highest inflows since March 2017.
- Outflows from oil ETPs continued as early-week price gains fail to hold.
Industrial metal ETPs saw their first inflows in four weeks.
As industrial metal positioning started to look stretched in August, we saw outflows begin and that continued as prices fell. However, last week as prices of most metals started to show signs of reaching a trough, inflows resumed. Speculative positioning in the futures market have pared back and volumes of trading in Shanghai have fallen indicating momentum trades are being shaken out. We saw US$5.0mn into long copper and US$4.4 into long nickel ETPs. Nickel is likely to benefit from growing demand for battery technology. Last week China announced that 10% of vehicles that automakers produce in 2019 must be low or zero emission, rising to 12% in 2020. With a higher loading of nickel expected in future batteries, the metal stands to benefit from regulatory driven changes in demand.
Robotic ETPs saw highest inflows since March 2017.
US$29.1mn of inflows marked the highest since March. Investors are impressed with a 35% return over the past year. Although technology stocks pared back gains in September, robotic stocks bucked the trend, posting over 4% gain.
Crude oil ETP outflows reached a 7-week high.
Oil prices received a boost earlier in the week as the autonomous Kurdish region in Iraq went to vote for independence. Investors took profits, withdrawing US$53.1mn from long crude oil ETPs. There is a risk that this oil-rich region, which produces more than ½ million barrels per day (mb/d) of Iraq’s 4½ (mb/d) output could be shut off from international markets as the Iraqi government bans the sale of oil from the region. This threat was largely ignored until the Turkish government claimed it will shut off the pipeline that carries the crude. Brent reached a 2-year high on Monday, rising almost 4% on the day. However the likelihood of Turkey following through is slim, given that it depends heavily on this source of oil and it is difficult to find alternatives at such short notice. Indeed the position of the Kurdistan Regional Government (KRG) is that they want the vote to open dialogue with the Iraqi government about independence rather than a declaration of independence itself. Despite the heated rhetoric and military drills, it is very likely that production will remain uninterrupted.
US$13.4mn of gold ETP outflows follow two weeks of inflows.
It looks like investors’ mind-sets are back on monetary policy after sabre-rattling between US and North Korea temporarily shifted their attention towards geopolitics. US Federal Reserve Chair Yellen emphasised in her speech last week that there are risks in moving too slowly in tightening. US 10-yr Treasures rose to 2.31% from 2.25% a week earlier, while the US dollar index gained 0.8%. Gold fell from US$1310/oz on Tuesday to US$1287.91/oz on Friday. Investors sold as gold prices fell.
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