Global ETF News Older than One Year
Fiscal Monitor Update
Strengthening Fiscal Credibility
January 27, 2011--Despite the improving global outlook, the pace of fiscal consolidation this year is slowing in some key countries. The United States and Japan are adopting new stimulus measures and delaying consolidation relative to the pace envisaged in the November 2010 Fiscal Monitor.
The underlying fiscal outlook has also weakened in some emerging markets—among them are several that need to build larger fiscal buffers, particularly in the face of surging capital inflows, overheating, and possible contagion from advanced countries. By contrast, advanced economies in Europe are projected to continue tightening policies amid heightened market scrutiny in several countries. Altogether, sovereign risks remain elevated and in some cases have increased since November, underlining the need for more robust and specific medium-term consolidation plans.
Fiscal outturns in 2010 were slightly better than projected, but some large emerging economies underperformed While advanced economies maintained expansionary fiscal policies on average in 2010, outturns were generally slightly better than projected in the November 2010 Fiscal Monitor
Source: IMF
Food prices: tackle volatility with better functioning markets, says OECD’s Gurría
January 26, 2011--Surging food and commodity prices are undermining efforts to tackle global poverty and hunger and threaten economic growth, said OECD Secretary-General Angel Gurría.
Welcoming the French government’s decision to make commodity price volatility and global food security priority issues of its G20 presidency, Mr Gurría said: “Agriculture markets have always been volatile, but if governments act together then extreme price swings can be mitigated and vulnerable consumers and producers better protected.”
“Commodity markets need to function better and more transparently,” Mr. Gurria said.
The OECD believes stronger discipline should be imposed on the use of trade restrictions – on both exports and on imports. OECD work has also shown the need for better public information on short-term production, consumption and stocks, as well as on medium-term market prospects. Greater transparency would help decision-making and avoid market panic, the OECD says.
Source: OECD
Global Financial Stability Report
Global Financial Stability Still at Risk
January 25, 2011--Nearly four years after the onset of the largest financial crisis since the Great Depression, global financial stability is still not assured and significant policy challenges remain to be addressed. Balance sheet restructuring is incomplete and proceeding slowly, and leverage is still high.
The interaction between banking and sovereign credit risks in the euro area remains a critical factor, and policies are needed to tackle fiscal and banking sector vulnerabilities. At the global level, regulatory reforms are still required to put the financial sector on a sounder footing. At the same time, accommodative policies in advanced economies and relatively favorable fundamentals in some emerging market countries are spurring capital inflows. This means that policymakers in emerging market countries will need to watch diligently for signs of asset price bubbles and excessive credit.
Source: IMF
World Economic Outlook Update
Global Recovery Advances but Remains Uneven
January 25, 2011--The two-speed recovery continues. In advanced economies, activity has moderated less than expected, but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks.
In many emerging economies, activity remains buoyant, inflation pressures are emerging, and there are now some signs of overheating, driven in part by strong capital inflows. Most developing countries, particularly in sub-Saharan Africa, are also growing strongly. Global output is projected to expand by 4½ percent in 2011 (Table 1 and Figure 1), an upward revision of about ¼ percentage point relative to the October 2010 World Economic Outlook (WEO). This reflects stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the United States that will boost activity this year. But downside risks to the recovery remain elevated. The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally. These need to be complemented with policies that keep overheating pressures in check and facilitate external rebalancing in key emerging economies.
Source: IMF
OPEC Monthly Oil Report January 2011
January 21, 2011--Oil Market Highlights
The OPEC Reference Basket increased further in December, moving within a $85-90/b range for a
monthly average of $85.56/b. The upward trend was attributed to bullish market sentiment, driven by improving macroeconomic expectations and the colder winter in the North Hemisphere. Declining inventories in the US and growing appetite for commodity investments, such as oil, also supported
prices.
In December, the Nymex WTI front month averaged $89.23/b and ICE Brent averaged $92.65/b. Futures continued to increase in early January to hit their 27-month highs with Brent around $98/b. For the year, the Basket averaged $77.45/b in 2010, up 26.8% from the previous year. The Basket moved higher in January to reach $94.04/b on 14 January.
The world economy continues to enjoy positive momentum backed by the ongoing expansion in the manufacturing sector. Growth for 2010 was revised up to 4.5% from 4.3% previously. Although dependent on government-led support, growth in 2011 has also been revised up to 3.9% from 3.8%. US growth is forecast at 2.8% in 2010 and 2.6% in 2011. The deceleration in Japan’s economy remains more pronounced, dropping to 1.5% in 2011 after growth of 4.3% in 2010. The Euro-zone, which is forecast at 1.5% in 2010 and 1.2% in 2011, is expected to continue its two-speed growth pattern, with Germany taking the lead. China and India still face signs of overheating and continue to be challenged by high inflation. The forecasts for China and India remain unchanged at 9.7% and 8.5% for 2010 and at 8.8% and 8.0% for 2011, respectively.
Source: OPEC
Deutsche Bank Index Fundamental Views Equities: Euro Stoxx 50 (Buy), Solid Q4 ahead
January 21, 2011--Trade idea: Buy Euro Stoxx 50 (ES50)
We have identified 3 key themes which support our positive view on the ES50 as
our bottom-up implied 2011E index target scores 3,308 index points which
corresponds to an upside of 14% to the current price level. Key theme no.1 is the positive view on European Banks (Bank account for c20% of ES50 index weight).
Banks are relatively cheap and have seen strongest ETF inflows over the past months among the European sector universe. Our European Strategy team is overweight ‘Banks’ and ‘Insurances’ (Financials account for c27% of ES50 index weight). Key theme no. 2 involves the upcoming Q4 2010 reporting season which promises solid results as we expect analysts’ estimates beats on net income and revenues in the order of >60%. A bottom-up aggregation of 28 ES50 companies suggests net income should grow by 45% qoq relative to Q4 2009 (up 44% yoy). Finally, our key theme no. 3: Fundamentals. Key metrics in the focus are a) attractive dividend yield/growth, b) comfortable leverage and c) a strong cash position (see middle chart on the right).
European fund flows: Strong flows into Euroland and especially into Banks Equities continue to be the most attractive class on our Asset Class Scorecard (review our ‘Index Trading Ideas and Flows’ note, published 11 January 2011). Overall, ETFs focused on Euroland added 3.8% to their AuM (+E734m) over the past month while ETFs focused on the European Union suffered outflows at 1.9% (-E464m).
Source: Deutsche Bank Global Markets Research
Top investors raise alarm on inflation
January 21, 2011--Some of the world’s leading investors have turned increasingly bearish on government bonds from developed countries as they warn of the growing danger of inflation.
Data this week showing the UK consumer price index hit 3.7 per cent in December fuelled concern and sent benchmark British borrowing costs to an eight-month high of 3.72 per cent.
Source: FT.com
Hedge Fund Industry Assets Swell to $1.92 Trillion
January 20, 2011--Hedge fund assets grew a record $149 billion during the last three months of 2010, according to new data released on Wednesday. According to Hedge Fund Research (HFR), which tracks industry performance and asset flows, hedge funds around the world now invest $1.917 trillion.
Investors added $13.1 billion in new money during the last quarter after having put in $19 billion in the third quarter. In total, pension funds, endowments and wealthy investors added $55.5 billion in new money in 2010, the highest annual total since 2007. The rest of the increase during the last quarter came from market gains.
Source: Reuters
Deutsche Bank 2010/2011 ETP Review & Outlook : ETFs walk an equity-able path towards $1.8 trillion in 2011
January 20, 2011--By all counts, 2010 was a very strong year for ETPs across all three major global regions. The global ETP market grew (in US$ terms) by an impressive 28%. The European market led the [percentage] growth registering 36% (in Euro terms), followed by the Asian market with growth of 31% (in US$ terms) and the US market registered growth of 28%. Growth in all three major regions was bolstered by very healthy cash flows (totaling $176.2 billion) that contributed to 16% of the year’s growth. Recovering asset markets also gave ETP assets a strong push, contributing an average of 13% increase to AUM from market appreciation.
We expect the global ETP market to continue growing by close to 30% [probability weighted scenario: 27.5%] in 2011. In our view, the ETF part of the market will lead the [dollar] growth, fueled by returning domestic equity investors both in the US and Europe. Market consensus growth estimates predict [ETF AUM weighted] average growth of 23.0% in North America and 13.2% in Europe, something which will benefit ETF AUM both from a market appreciation point of view as well as from increased allocation to the industry’s biggest asset class, equity.
2010 was the strongest product launch calendar for the industry with an impressive 648 new product launches. Europe led the way with 391 new product launches, followed by the US and Asia with 176 and 81 product launches respectively. Most of the new products launched, 533, were ETFs, with ETCs in Europe taking second position (106) and ETVs in the US taking third place (9).
Emerging markets were undoubtedly the biggest success story of 2010 in the global equity ETF market. In search of return opportunities and in light of increased mid-year volatility in both the US and European domestic markets, investors elevated ETFs to one of the major emerging market investment tools. The global ETF industry saw a total of $42.0 billion of new flows to this corner of the market, with both the US and European markets strongly supporting this trend.
US equity emerging market inflows reached $26.5 billion, while the respective number for Europe registered at €9.1 billion. The most popular ETF emerging markets benchmark, MSCI Emerging Markets, saw its ETF assets appreciate by $41.3 billion over the year, while the index itself (NDUEEGF) rose by 19.0% in 2010. This follows returns of 78.5% in 2009. With US and European domestic investors returning to their own markets, the debate has now moved to whether this segment of the equity market has perhaps had its run. Several short emerging market ETF products have been launched in anticipation of this scenario materializing. Equity research analysts are however predicting continued average growth in emerging markets of close to 12%.
In the US market, fixed income had a very strong run. The asset class took in a total of $33.0 billion of new money, with corporate and high yield ETF benchmarks gaining the lion’s share, amassing inflows of $14.3 billion. The European fixed income market, while it received positive flows of €5.8 billion, it experienced much weaker activity [than the US], despite a major fixed income product push by many European providers. Fixed income investors’ interest in the European Union in the first three quarters of the year revolved around sovereign ETF indices (2010 inflows €3.6 billion), while corporate ETF benchmarks also saw a fair level of interest (2010 inflows €2.0 billion) especially in the third quarter of the year.
Gold, another one of the year’s big success stories, significantly contributed to bolstering ETC and ETV flows over 2010 and it single-handedly carries the credit for lifting the fortunes of the commodity ETP space in 2010. The US market saw $13.1 billion of precious metals ETP inflows, while gold accounted for $9.2 billion of those. In Europe, the picture was very similar to that in the US. The European commodity ETP market gathered €6.0 billion of inflows, while gold accounted for €5.1 billion. As equities markets continue to rebound, the spotlight this year is firmly set on ETFs, where we expect to see most of the cash flows in 2011. Subject to gold price dynamics, gold ETPs will continue to receive inflows, but unless we see a significant downward change in equity market sentiment, gold is likely to be on the slow burner [in terms of ETP flow growth] for the year ahead.
To request a copy of the report
Source: Deutsche Bank Global Equity Index & ETF Research
Economy: Well functioning housing markets are key for stability and growth
January 20, 2011--Poorly managed housing markets played a key role in triggering the recent global financial crisis and may be slowing the recovery. A new OECD study offers governments a roadmap for sounder housing policies.
“Housing and the Economy: Policies for Renovation” says reforms to financial sector regulation, taxation, land-use, rental market rules and the provision of social housing will improve both the real estate sector and spill-over to the economy as a whole.
OECD countries have seen the damage caused by badly designed policies through their effects on housing markets,” said OECD Secretary-General Angel Gurria. “As we search for new sources of growth, as we seek to restore trust in our financial sectors, as we try to green our economies, policies related to housing can have a huge impact on our future”.
The OECD says that easy credit over the past two decades amplified price volatility, with real housing price jumps of 90% or more in Australia, Belgium, Finland, Ireland, Netherlands, New Zealand, Norway, Spain and the United Kingdom over the study period. Deregulation and innovation in mortgage markets – coupled with inadequate supervisory frameworks – contributed to a significant relaxation in lending standards, an increase in non-performing loans and the sub-prime crisis.
view the report Housing and the Economy: Policies for Renovation
Source: OECD
