Investors abandon industrial metals ETPs amid market sell-off

Feb 13th, 2018 | By | Category: Commodities

ETF Securities’ range of industrial metals ETPs saw net outflows of $99 million for the week starting 5 February 2017 amid the global equity market sell-off, according to the firm’s weekly flows analysis.

Gold ETF inflows reach 3-week highs, says ETF Securities

Nitesh Shah, commodity strategist at ETF Securities.

Nitesh Shah, director of research at ETF Securities, said that industrial metals are “arguably the most cyclically exposed of all commodities”, noting these were the highest outflows in ten weeks for this asset class.

Broad basket industrial metals ETPs constituted the bulk of outflows at $133.6m, while the firm’s copper ETPs recorded outflows of $26.3m. Nickel and Silver ETPs, however, gathered $61.3m and $19.3m net inflows respectively, highlighting that some investors are tactically searching for opportunities after recent price declines.

Investors looking for broad exposure to the sector after the recent sell-off may wish to consider the ETFS Industrial Metals (AIGI LN) with AUM of $200m and a 0.49% management fee as of 9 February 2018. Its largest exposures are copper (39.6%) and aluminium (25.4%), followed by zinc (18.3%) and nickel (16.7%).

Elsewhere in the report, flows into the firm’s European equity ETPs showed positive sentiment for the region. Both inflows into long European equity ETPs and outflows from short European equity ETPs rose to the highest levels since 2016. European equity ETPs fetched $15.9m in inflows during the drop, while short investors took profits by selling $9.9m in European short (mainly UK) ETP positions.

Shah suggested, “The trading patterns indicate that many ETP investors see the current equity market declines as transitory.”

ETF Securities offer a host of different ETPs with leveraged long and short exposures to various European equity markets. As of 9 February 2018, the ETFS 3x Daily Long EURO STOXX 50 (EUL3 LN), with €5.5m AUM, and the ETFS 3x Daily Short EURO STOXX 50 (UES3 LN), with €7.4m AUM, offer the broadest exposures to the region.

The report also showed that gold, usually the go-to safe haven in times of turmoil, saw net outflows of $57.3m last week. Shah highlighted “a second US government shutdown in the space of three weeks on Friday only offered temporary support to gold as a spending bill was signed and government re-opened in a matter of hours.”

Investors looking for pure gold price exposure can opt for the ETFS Physical Gold (PHAU LN) with $6.3bn in AUM and a 0.39% management fee.

Moving to oil, record US oil production continued to weigh on the sector, with oil ETPs experiencing weekly outflows of $29.7m. Shah stated, “In the past 32 weeks there has only been one week of inflows into oil ETPs. In contrast to oil futures, which had recently seen speculative positioning rise to an all-time high, ETP investors had been selling into the price rally that started in June 2017 and ended in January 2018. With many ETP investors having accumulated positions during the price declines from 2014, recent selling indicates profit taking.”

As a potential contrarian play, ETF Securities’ largest oil ETP is the ETFS WTI Crude Oil (CRUD LN) with $594.8m AUM and a 0.49% management fees.

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