Asset And Portfolio Managament

ETF Market Making

European equity markets moved upwards, whilst American and Asian markets were mixed. The Federal Reserve (Fed) hiked its target corridor for the Fed Funds by another 25 basis points to 0.75 to 1.00% as had been widely expected. What came as a surprise to many market participants was that it did not give any indication of the pace of further rate hikes. Trump continued to throw tantrums last month: a new watered-down travel ban, a revived debate on drug prices, and a failed overhaul of the US healthcare system. US macrodata was largely positive last month especially those related to employment. Inflation data for the US showed, except for a few disappointing data points, that it was approaching the Fed’s targets. The European Central Bank’s (ECB) meeting in early March did not provide any fresh surprises relating to the quantitative easing programme. Political risks in Europe abated significantly last month: polls showing Emmanuel Macron gaining momentum over populist candidate Marine Le Pen in the French presidential elections as well as the defeat of the far-right party led by anti-EU, anti-Islam Geert Wilders at the Dutch general elections were a relief to the markets. However, the eventual triggering of Article 50 to kick off the Brexit process raised concerns. Economic data was mixed in the EU.

From an ETF trading perspective more than 182,500 trades were executed which, together with overall cash inflows, was close to a new record high. The flow is distributed as follows: 79% for equities, 17% for fixed income and 4% for commodities.

Within equities cash inflows were seen. The most actively traded underlyings were the S&P 500, EURO STOXX 50, DAX and MSCI World. From a regional perspective the most active regions were the USA (23%) and the eurozone (18%). Although US stocks posted a muted performance in early March, in anticipation of another rate hike, a dovish Fed and strong macrodata boosted returns mid-month. However, caution about Trump’s ability to push legislation through the Congress saw stocks ending the month roughly unchanged. As political risks abated in Europe and as the ECB upgraded growth forecasts for the region European stocks gained. Sector-wise the top three are composed of financials, energy and basic resources with respective shares of 24%, 12%, and 9%.

Fixed income saw minor cash inflows. Both sides are led by the MTS IG Inflation-Linked Mid Index. U.S. treasury yields rose early on in the month as a near-certain rate hike approached but dropped later in the month as investors took a risk-off stance. The March ECB meeting statement, that was interpreted as hawkish, caused Bund yields to rise considerably before disappointing inflation data and a report stating the bank’s intentions may have been overinterpreted curbed gains. Commodities saw neither cash in- nor outflows. Crude oil futures suffered last month as oversupply worries returned. US inventories reached record levels while US oil output and rig count continued to rise. Precious metals slid early in the month in view of the impending Fed rate hike, however, as the Board took a dovish stance most losses were recovered. The sell side is headed by the CBK Commodity ex-Agriculture EW Index, the buy side by the CBK Commodity ex-Agriculture TR H Index.

Commerzbank ETF flow from 01/03/2017 to 31/03/2017

Asset class in % of total

Client sell

Asset class

Client buy

Asset class

Underlying

Underlying

48%

52%

79%

37%

Equity

42%

Equity

5%

S&P 500

6%

S&P 500

3%

EURO STOXX 50

3%

EURO STOXX 50

3%

DAX

2%

MSCI World

2%

MSCI World

2%

DAX

1%

MSCI Emerging Markets

2%

MSCI Emerging Markets

1%

UK 100

1%

MSCI EMU

0.96%

MSCI USA

1%

UK 100

0.85%

MSCI Japan

0.90%

MSCI Europe

0.80%

MSCI Europe

0.80%

MSCI USA

0.54%

MDAX

0.62%

MSCI Japan

17%

8%

Fixed income

8%

Fixed income

0.94%

MTS IG Inflation-Linked Mid

0.94%

MTS IG Inflation-Linked Mid

0.85%

Markit iBoxx USD LQ IG IR Hedged

0.85%

Markit iBoxx USD LQ IG IR Hedged

0.59%

CBK Bund-Future Short

0.50%

Barclays EM Lcl Currency Lqd Gov

0.51%

Barclays Euro Agg Corps

0.49%

Barclays Euro Agg Corps

0.51%

Barclays EM Lcl Currency Lqd Gov

0.45%

Markit iBoxx EUR Pfd briefe

4%

2%

Commodity

2%

Commodity

1%

CBK Commodity ex-Agriculture EW

1%

CBK Commodity ex-Agriculture TR H

0.19%

LBMA Gold Price

0.41%

CBK Commodity ex-Agriculture EW

0.07%

Bloomberg Sub Nickel

0.09%

LBMA Gold Price

0.05%

CBK Commodity ex-Agriculture TR H

0.08%

Brent oil

0.04%

Brent oil

0.07%

Bloomberg Sub Nickel

Source: Commerzbank, ETF Market Making. Data as of March 2017

In % of total

Issuer

Underlying

Ratio

Client sell

Client buy

3%

ComStage ETF

S&P 500

35%

65%

2%

iShares ETF

S&P 500

50%

50%

2%

Lyxor ETF

MTS IG Inflation-Linked Mid

50%

50%

2%

ComStage ETF

CBK Commodity ex-Agriculture EW

78%

22%

2%

ComStage ETF

DAX

49%

51%

2%

iShares ETF

Markit iBoxx USD LQ IG IR Hedged

50%

50%

2%

iShares ETF

DAX

51%

49%

1%

ComStage ETF

EURO STOXX 50

56%

44%

1%

Vanguard ETF

S&P 500

70%

30%

1%

iShares ETF

EURO STOXX 50

49%

51%

Most traded ETFs from 01/03/2017 to 31/03/2017
Most traded ETFs from 01/03/2017 to 31/03/2017
Source: Commerzbank ETF Market Making

In % of total

Region

Ratio

Client sell

Client buy

23%

USA

49%

51%

18%

Eurozone

47%

53%

16%

Global

46%

54%

11%

Europe

44%

56%

10%

Germany

54%

46%

5%

Emerging markets

49%

51%

4%

UK

49%

51%

3%

Japan

51%

49%

2%

China

45%

55%

1%

Asia-Pacific region ex. Japan

49%

51%

7%

Others

46%

54%

Most traded ETFs by region from 01/03/2017 to 31/03/2017
Most traded ETFs by region from 01/03/2017 to 31/03/2017
Source: Commerzbank ETF Market Making

In % of total

Sector

Ratio

Client sell

Client buy

24%

Financials

47%

53%

12%

Energy

47%

53%

9%

Basic resources

50%

50%

9%

Technology

36%

64%

8%

Real estate

46%

54%

7%

Healthcare

48%

52%

6%

Utilities

28%

72%

5%

Telecommunications

56%

44%

5%

Materials

36%

64%

3%

Industrials

47%

53%

3%

Insurance

37%

63%

1%

Food & beverage

57%

43%

1%

Consumer staples

39%

61%

1%

Personal & household goods

17%

83%

5%

Other

63%

37%

Most traded ETFs by sector from 01/03/2017 to 31/03/2017
Most traded ETFs by sector from 01/03/2017 to 31/03/2017
Source: Commerzbank ETF Market Making