November 2019 ETP flow trends

Natasha Sarkaria
Natasha Sarkaria
Investment Strategist

Key themes this month:

1. A big NovEMber: Inflows return to EM equity
2. Merrily on high (yield): High yield flows turn positives
3. Coal in the stocking?: First outflow month for commodities since April

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.

Unless otherwise stated all data is sourced from the BlackRock Global ETP Landscape at 30 November 2019. All amounts given in USD.

1. A big NovEMber

  • EM equity flows returned with a bang in November: the exposure registered its first inflow month in four with a bumper $2.4B added. This is the third largest monthly inflow for the exposure in 2019, and marks a shift after $5.1B of outflows between August and October.
  • EMD, on the other hand, has been consistently popular amongst EMEA investors in 2019; November marked the ninth month of inflows into EMD this year. Investors showed a preference for local currency ETPs for the second consecutive month (+$1.4B), while hard currency ETPs lost $0.4B.
  • The inflows across EM into the end of the year look to be in line with the pickup in EM flows that we saw in 2018, and at a higher level (see chart opposite). In December 2018, we saw a large increase in both equity and fixed income flows into EM –$2.4B and $0.9B, respectively.

Looking to history

Cumulative flows into EMEA-listed EM equity and EMD ETPs, January 2018-November 2019

Cumulative flows into EMEA-listed equity ETPs, January-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 30 November 2019.

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2. Merrily on high (yield)

  • High yield inflows turned positive in November (+$0.4B) for the first time in three months. Although there were inflows at the headline level, investor conviction on the exposure appears to have dampened since earlier in the year: between January and August 2019, just one month of outflows interrupted the climb of inflows into HY.
  • Despite this, 2019 is still shaping up to be a record year for EMEA-listed HY ETPs, with $7B added so far, compared to -$0.9B in 2018, and a previous record in 2015 of $5.5B.
  • Elsewhere in fixed income, IG continued to be popular with investors adding another $1.8B in November, in the largest inflow month since June. Rates –which haven’t had a single month of outflows in 2019 –gathered a reduced $0.7B in November.

Plateauing?

Cumulative flows into EMEA-listed HY ETPs, January-November 2019

Monthly flows into EMEA-listed fixed income ETPs, January-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 30 November 2019.

3. Coal in the stocking?

  • After a stellar 6-month run of consecutive inflows, commodity ETPs registered their first outflow month since April. November was the biggest outflow month for commodities this year, with investors selling -$0.4B of commodity ETPs.
  • Outflows were concentrated in gold ETPs, where investors sold -$0.6B in the largest outflow month this year. Investors also sold -$0.1B of silver ETPs November, off the back of a perceived cooldown in trade tensions and signs of stabilisation in macro data. Despite this, YTD flows into gold continue to remain strong at +$7.5B and flows into silver are steady at +$0.6B YTD.
  • On the other hand, investors favoured broad market commodity ETPs last month with $0.5B of inflows. This was the largest month of buying for broad market commodities this year. While overall risk sentiment has risen, investors are still seeing some need for portfolio diversification through broad commodity exposure.

Out with the gold

Monthly flows into EMEA-listed gold ETPs, January-November 2019

Monthly flows into EMEA-listed commodity ETPs, January 2019-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 30 November 2019.

Past flows into EMEA-listed ETPs are not a guide to current or future flows and should not be the sole factor of consideration when selecting a product. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation to, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Investment in the products mentioned in this document may not be suitable for all investors. BlackRock has not considered the suitability of any product against your individual needs and risk tolerance.

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