Global ETP flows top $35bn in May, but EMEA-listed products lose ground

Jun 8th, 2018 | By | Category: ETF and Index News

Net inflows into exchange-traded products (ETPs) reached $35.1bn globally in May, bolstered by strong flows into US equity products at $26.1bn, according to the latest ETP Landscape Report from BlackRock. Robust corporate earnings and corporate tax cuts were supportive of these flows. 

Wei Li, head of iShares EMEA investment strategy at BlackRock

Wei Li, head of iShares EMEA investment strategy at BlackRock.

Developed markets equities continued to see inflows for the fifth consecutive month with $8bn in May, bolstering the year-to-date flows to $43.1bn.

Global fixed income also had a good month, with continued steady flows bringing in $6.3bn across investment grade, corporate with $2.4bn, US Treasuries with $1.4bn and treasury inflation-protected securities (TIPS) with $1.2bn.

The picture was less rosy for EMEA-listed ETPs, which bucked the global trend, experiencing net outflows of around $100m. Healthy flows into commodity ETPs were more than offset by outflows from equity ETPs, most notably from those providing exposure to European equities.

Wei Li, Head of iShares EMEA Investment Strategy at BlackRock, highlighted the three key stories behind EMEA flows last month:

Gold star

Flows into commodity ETPs led the inflows in May once again, adding $1.2bn over the course of the month. The flock to safe-haven assets was evident with equity outflows continuing. Strong buying of gold comes amid political uncertainty in Europe and ongoing trade tensions surrounding the US inflows into gold ETPs in Q2 stand at $2.33bn, the highest quarterly level since the US election.

Risk off

EMEA-listed equity ETPs lost $1.5bn in May, with European equity ETPs leading the outflows once again at -$3.7bn. Emerging markets equities had outflows for the first time since January 2017 (-$642m). Political uncertainty in Italy and Spain has hampered investor confidence; a rollercoaster end to the month that resulted in an Italian government finally being sworn in and a new Prime Minister in Spain, led investors to look elsewhere. Investors had moved away from equities in general and in Europe in particular where political uncertainty, mixed macro data and lower earnings growth relative to the US have weighed on market sentiment.

However, money continues to be added to US equity ETPs, albeit a reduced figure of $639m this month, countering the general flight to safe-haven assets in May. Investor conviction may have been boosted by US earnings growth of 24.6% over the Q1 earnings season.

An improving grade

Investment grade ETPs registered their first inflow month of 2018 in May, with $336m added over the course of the month. We have recently seen investors start to return to global investment grade ETPs, and last month’s inflows show that EMEA investors are catching up with the global trend. Money was also added into inflation-linked ETPs, which gathered $424m. Government bond ETPs had their first outflow month in three months as European political uncertainty led to selling out of European-focused government bond ETPs.

Emerging market debt (EMD) continued to lose assets in May, with -$408m. The selling was entirely out of local currency EMD ETPs, while hard currency ETPs had inflows of $328m. A stronger dollar in 2018 has led to continuous selling out of local currency ETPs from March onwards, totalling -$1.24bn.

Assets by listing region

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