Deutsche Bank – Synthetic Equity & Index Strategy – Europé Opposing Views by European and US ETP Investors on European Equities
October European ETP Highlights
As of the end of October 2014, global ETP assets was at $2.5 trillion rising by $278bn (+12.3%) year-to-date. In October, European ETPs registered healthy cash flows of +€5.6bn (-€2.2bn in the prev. month). Equity and fixed income ETFs were the major contributors of inflows receiving +€3.8bn and +€2.2bn respectively. ETPs tracking commodities experienced -€0.3bn of net outflows in October. During this month, the proportion of ETP trading versus cash equities trading unsurprisingly rose both in Europe (8.6% in Oct vs. 7.2% in Sep) and US (29.1% in Oct vs. 24.2% in Sep) due to elevated market volatility.
European ETP investors preferred DM over EM equities
Within the equities segment, investors trading European ETPs showed a clear preference for Developed Market equities where we saw net inflows of +€4.2bn. In contrast, ETPs tracking Emerging Markets equities experienced -€1.2bn of outflows. US equities contributed to a significant portion of inflows with large amount of investments into the S&P 500. European blue chips, UK equities and broad European indices also benefitted from inflows.
US investors cautious on Europe and EUR
Investors trading US ETPs exercised a more cautious stance on Europe considering the significant outflows (-$4bn) from ETPs tracking European equities. However, a select few US investors expressed a positive view on broad European equities but simultaneously protected themselves against the EUR by buying currency hedged products. US ETP investors were also net buyers of Russia and Germany.
ECB stimulus boosts flows into corporate bond ETPs
The announcement by the ECB to introduce monetary stimulus to support the recovery in Europe has helped the Corporate Bond ETP market. The ECB has indicated their willingness to add stimulus if needed with purchases of corporate bonds being a potential option. As a result, European ETP investors were net buyers of Corporate Bonds where we observed +€1.8bn of inflows, highest than any monthly inflows in 2014.