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DB-Global Equity Index and ETF Research-European ETF Market Monthly Monitor:Quest for yield: Dividends and corporate bond credit at the forefront
September 13, 2012--ETFs drive the yield race in August
August brought continuation of trading volume decreases both with regards to cash equities and ETFs, but it also brought continuation of selective yield driven asset allocation themes.
As the year draws to an end, the quest for yield comes across clearly in ETF investment themes on both sides of the Atlantic. We have observed the following ETF asset allocation themes over the month of August:
European broad equity diversified bets on the rise, largely driven by equity price adjustments.
August proved to be strong with US dividend announcements and this helped drive flows towards US diversified equity indices.
ETFs benchmarked to emerging market diversified equity indices see a second round of interest, based on their relative yield attractiveness when compared to developed market broad indices.
US liquid high yield flows continue to soar on the back of attractive credit spreads.
Investment grade corporate bond flows have another strong month as low interest rate environments in the US and Europe plus relative credit strength make yields attractive.
We elaborate on this month’s ETF asset allocation themes in the ‘Defining ETF investment trends section’ on page 5.
Over August 2012, the European ETF industry delivered a solid overall cash flow performance with net new money totaling €2.5 billion, which are 24% higher – in USD terms - over those registered by US domiciled ETFs over the same period. The European industry is 3.7 times smaller than the US ETF industry. The US industry had its slower cash flow month this year gathering total flows of $2.5 billion. The health of August’s European ETF cash flows came on the back of strong July flows amounting to €2.6 billion.
Turnover activity remains suppressed both with regards to cash equities in general as well as ETFs. The turnover slump is prevalent both when comparing to the same month last year as well as to the prior month. European cash equities turnover for August is down 16% from July and 49% down from August 2011. European (on-exchange) ETF turnover for August is down 5% from the prior month and 59% from the same month last year. August 2011 was the strongest turnover month for that year, both for cash equities as well as ETFs.
But while the quantity – as measured by turnover volumes - might be thinner this month, we believe that the quality of the trades is there. European ETF industry August activity was characterized both by stronger equity cash flow performance as well as a continuation of fixed income flow themes. European investors allocated net inflows of $780 million into equity benchmarks, while US investors registered outflows of $2.3 billion over August. We consider this month to be a strong one because cash flow activity had directionality and size, as well as consistency when compared to what we have observed in prior months.
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Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
ESMA publishes a Q&A on Short-Selling Regulation
September 13, 2012--The European Securities and Markets Authority (ESMA) has published a Q&A on the Implementation of the Regulation on short selling and certain aspects of credit default swaps.
The purpose of the Q&A is to promote common supervisory approaches and practices amongst the EU’s national securities markets regulators on the requirements of the Short Selling Regulation once it comes into force on 1 November 2012. It will also provide clarity on the requirements of the new regime to market participants and investors.
Issues addressed by the Q&A
The document provides responses to questions posed by market participants, national securities markets regulators, and the general public in relation to the practical application of the forthcoming Short Selling regime.
It addresses issues related to:
territorial scope;
transparency requirements;
calculation of net short positions;
uncovered short sales;
view the ESMA Q&A-Implementation of the Regulation on short selling
and certain aspects of credit default swaps
Source: ESMA
Ferber Promises to Slow HFT Down and Banish Broker Crossing Networks with MiFID II
September 13, 2012--All high-frequency traders and broker-dealers should look away now.
Markus Ferber, the German center-right MEP tasked with guiding the revised Markets in Financial Instruments Directive (MiFID II) through the European parliament, today told Markets Media that new rules will be put in place to slow down high-frequency trading and that there will be no place for broker crossing networks in this post-MiFID II landscape.
Ferber, who is also a member of the Economics and Monetary Affairs Committee (Econ), said that Econ will be ready in two weeks to finally vote on MiFID II. Over 2,000 amendments postponed the original vote on MiFID II in July, which promises a huge shift in the way financial markets operate in Europe and will, according to Ferber, “close the loopholes” of the 2007 original.
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Source: Markets Media
Relief as German court clears euro rescue fund, fiscal pact
September 13, 2012-- The eurozone took a major step Wednesday towards solving its debt crisis as Germany's top court cleared a new bailout pot, a ruling Angela Merkel hailed as a "good day for Europe".
In a landmark ruling watched around the world, the Constitutional Court dismissed a raft of legal challenges aimed at preventing German President Joachim Gauck from signing two crucial crisis-fighting tools into law.
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Source: EUbusiness
db x-trackers bond index ETFs on Italian government bonds launched on Xetra
September 12, 2012--Three new exchange traded funds issued by db X-trackers II, a subsidiary of Deutsche Bank, have been tradable in the XTF segment on Xetra since Wednesday.
ETF name: db x-trackers II MTS Ex-Bank of Italy BTP ETF
Asset class: bond index ETF
ISIN: LU0613540185
Total expense ratio: 0.20 percent
Distribution policy: non-distributing
Benchmark: MTS Italy BTP - Ex-Bank of Italy Index
ETF name: db x-trackers II MTS Ex-Bank of Italy BOT ETF
Asset class: bond index ETF
ISIN: LU0613540268
Total expense ratio: 0.15 percent
Distribution policy: non-distributing
Benchmark: MTS Italy BOT – Ex-Bank of Italy Index
ETF name: db x-trackers II MTS Ex-Bank of Italy Aggregate ETF
Asset class: bond index ETF
ISIN: LU0613540698
Total expense ratio: 0.20 percent
Distribution policy: distributing
Benchmark: MTS Italy Aggregate - Ex-Bank of Italy Index
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Source: Xetra
STOXX Expands Maximum Dividend Strategy Index Family
September 12, 2012--STOXX Limited, the market-moving provider of innovative, tradable and global index concepts, today announced the expansion of its Maximum Dividend Strategy Index family with the launch of the STOXX Global Maximum Dividend 40, STOXX Asia/Pacific Maximum Dividend 40, STOXX North America Maximum Dividend 40 and STOXX Japan Maximum Dividend 40 indices.
The new indices are designed to act both as a proper benchmark for actively managed funds, and as an underlying to exchange-traded funds and other investable products.
The new STOXX Maximum Dividend Indices represent a hypothetical investment portfolio that aims to maximize the dividend yield of the STOXX Global 1800, STOXX Asia/Pacific 600, STOXX North America 600 and STOXX Japan 600 indices by selecting those 40 companies in the underlying index that have the highest expected dividend yield.
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Source: STOXX
Deutsche Boerse signs exclusive agreement with Fitch Ratings to offer machine-readable credit ratings
September 12, 2012--Deutsche Boerse today announced an exclusive agreement with Fitch Ratings to deliver low-latency credit rating announcements in machine-readable format via its news feed "AlphaFlash".
The AlphaFlash Fitch Ratings feed will initially provide sovereign debt rating announcements including changes in outlook. Other types of credit ratings will be added in the next months.
“The Euro debt crisis has brought credit worthiness to the forefront of everyone’s attention. By adding Fitch ratings data, we are enabling AlphaFlash clients to instantly react to rating changes, which can have a huge market impact,” said Georg Gross, Head of Front Office Data & Analytics at Deutsche Börse. “For example, they can feed our data into their risk management tools and automatically unwind positions that may be exposed when an outlook or a rating deteriorates.”
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Source: Deutsche Boerse
ETF specialist launches 8 thematic funds
September 11, 2012--The London-based group ETF Securities has announced the launch of eight Ucits-compliant ETFs on the Swiss market which mainly focus on the energy sector.
ETF Securities, which currently manages over €21 billion and leading ETP provider, has launched the following Ucits ETFs on the SIX Swiss Exchange:
ETFX DAXglobal Alternative Energy Fund - designed to track the performance of the DAXglobal Alternative Energy Index, replicating performance of the fifteen largest companies worldwide in the alternative energy segment.
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Source: CityWire
Deutsche Bank decides to integrate asset management divisions
September 11, 2012--Deutsche Bank is planning to set up an asset and wealth manager-which will include businesses it had formerly put up for sale- – that is to serve as the bank's "fourth business pillar".
As announced in June, the bank plans to establish Asset & Wealth Management (AWM), including former corporate banking and securities business such as ETFs.
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Source: IP&E
ETF specialist launches 8 thematic funds
September 11, 2012--The London-based group ETF Securities has announced the launch of eight Ucits-compliant ETFs on the Swiss market which mainly focus on the energy sector.
ETF Securities, which currently manages over €21 billion and leading ETP provider, has launched the following Ucits ETFs on the SIX Swiss Exchange:
ETFX DAXglobal Alternative Energy Fund - designed to track the performance of the DAXglobal Alternative Energy Index, replicating performance of the fifteen largest companies worldwide in the alternative energy segment.
ETFX DAXglobal Coal Mining Fund - designed to track the performance of the DAXglobal Coal Index. The index‘s constituents are exclusively companies from the areas of coal mining, mining equipment and coal transportation that generate at least 50% of their revenue from this sector.
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Source: CityWire
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