“I can’t believe it’s almost over!” That’s the universal lament I’ve been hearing ever since the calendar ticked over to August 1. Back-to-school ads are on TV and everyone is turning their minds to September.
But summer’s not over yet for exchange-traded funds (ETFs).
In fact, two pieces of research released last week indicate that investors didn’t spend their summer hitting the beach or holidaying at the cottage.
Both the BlackRock ETP Landscape report and ETFGI’s monthly report on flows indicate quite clearly that investors spent July pouring money into ETFs mainly focused on specific regions—and pulling it out of one or two other areas that were hot last year.
What was on their summer hit list? Here are five:
Canada—In July, while you were at the cottage kicking back in a Muskoka chair, Canadian-listed ETFs pulled in US$1.4 billion in net new assets according to ETFGI. That pushed assets in Canadian ETFs to a new record high of US$65.9 billion.
Japan—ETF investors helped fuel a rally in Japanese equities, despite lack of evidence that Abenomics is leading to any meaningful economic growth in that country. Investors have faith that the stimulus program will kick in and translate into growth.
China—Investors are desperate for signs—any signs—that China is not on a crash course to a financial crisis. So when China released relatively positive data that its GDP grew 2% in Q2, investors responded by showing some love to emerging markets: July saw equity flows into Chinese and emerging markets equity funds of US$2 billion and US$4.3 billion, respectively.
Europe—ETF investors skipped the European vacation this year—probably a good idea now that Italy has slipped back into recession. After a stellar year that has seen European ETFs gather US$50 billion in assets, July saw investors take a breather. Flows were negligible during the month, according to BlackRock.
High-yield corporates—Investors are pulling out of corporate high-yield ETFs, reversing one of the biggest trends in the space. With higher rates on the way (at some point), investors have begun selling.