UK large-cap ETFs benefit from record FTSE 100 winning streak

Jan 16th, 2017 | By | Category: Equities

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


The holiday spirit over Christmas and the New Year typically boosts capital markets, and 2017 has been no exception for UK equities and FTSE 100 ETFs.

UK equity ETFs benefit from record FTSE 100 winning streak

The FTSE 100 Index achieved its longest winning streak on record, rising for 14 consecutive days until Friday 13 January – hitting 7337.81 points – and registering 12 record closing values in a row.

The FTSE 100 Index achieved its longest winning streak on record, rising for 14 consecutive days until Friday 13 January – hitting 7337 points – and registering 12 record closing values in a row. Last week also marks the sixth week of gains, the first time this has happened since the summer of 2012.

The profitable run began on 21 December, thanks to mining companies enjoying rising metal prices, as well as retailers seeing better-than-expected performance figures. On Friday afternoon, US retail sales and confidence figures also lifted the dollar and further weakened the pound, providing a boon to British exporters.

“The Footsie has now seen [a] dozen days of price increases, in what amounts to its longest winning streak ever. It won’t go on forever, but the winter rally has shown it has considerable legs,” said Laith Khalaf, senior analyst at Hargreaves Lansdown, on 11 January.

Several ETF providers offer a FTSE 100 ETF. The cheapest and the largest is the 4.7bn iShares Core FTSE 100 UCITS ETF (LON: ISF) which costs 0.07%. ISF is up 3.3% so far this year and a healthy 27.6% over the past 12 months.

The HSBC FTSE 100 UCITS ETF (LON: HUKX) costs the same fee but has much less assets at £138m.

Other significant ETFs linked to the FTSE 100 include the Vanguard FTSE 100 UCITS ETF (VUKE), which holds over £2.3bn in AUM and carries a fee of 0.09%, and the UBS FTSE 100 UCITS ETF (UBO3), with over £120m in AUM and fees of 0.20%. Notable leveraged plays include the ETFS 3x Daily Long FTSE 100 (UK3L) from ETF Securities and the Boost FTSE 100 3x Leverage Daily ETP (3UKL) from Boost ETP, part of WisdomTree.

UK mid-caps and the FTSE All-Share Index has also performed well during 2016, with the Vanguard FTSE 250 UCITS ETF (LON: VMID) and the SPDR FTSE All-Share UCITS ETF (LON: FTAL) up 12.8% and 25.2% over the last 12 months respectively.

The FTSE 100 has largely benefitted from the depreciation of the British pound in the wake of the UK’s decision to leave the European Union, making British goods and services more competitive on the international stage. The dollar/Sterling exchange rate fell from 1.49 $/£ on 23 June 2016 to 1.21 $/£ by 14 January 2017. The euro/Sterling exchange rate fell from 1.30 €/£ to 1.14 €/£ over the same period. As the pound hit a 31-year low against the dollar due to the prospect of a “hard Brexit” on 4 October, for example, the FTSE 100 closed at an almost record high of 7,074 points.

Sterling volatility is likely to fluctuate further as UK Prime Minister Theresa May prepares for her Brexit speech on Tuesday, outlining the government’s approach to negotiations before triggering Article 50.

The success of some domestic stocks within the UK indices, however, suggests the rally is not being solely driven by multinational companies benefiting from a lower sterling currency.

“It’s important not to get too carried away with the recent run of good form,” warned Khalaf. “Over such a short time frame it’s best to take stock market movements with a pinch of salt, whether they are good or bad.”

Last New Year, the FTSE 100 took investors on a bumpy ride. The index plummeted more than 7% in the first two weeks of January, rebounding around 4% by the end of the month and then tanking 6% to 5,707 points by mid-February, its lowest level since late 2012.

But despite an index dip of about 5.6% in the four days after the Brexit referendum last June, and an even smaller drop after Donald Trump was elected on 8 November to become the 45th US President, global capital markets contagion, as predicted by some analysts, did not come to pass.

For investors who do not want to invest too heavily in UK equities, European equity indices ended the week higher, too, boosted by positive updates from banks like JP Morgan and the Bank of America.

The Amundi ETF MSCI Europe UCITS ETF (LON: CEUR) is up 3.3% year to date and 28.2% over the past 12 months in GBP terms. In euro terms (EN PARIS: CEU), the fund is up 1.4% and 10.4% over the same time periods. The ETF holds around 30% in UK stocks before diversifying across Europe with significant country exposures to France (16.1%), Germany (14.7%) and Switzerland (13.7%), for example. It is the cheapest ETF tracking this index compared to at least seven funds from other ETF providers.

Tags: , , , , , , , , ,

Leave a Comment