ETF flows slow again in an uncertain environment….
By Marlène Hassine Konqui, Head of ETF Research and Kristo Durbaku, ETF Research Analyst
Net new assets in the European ETF market dropped to €1.1bn in October – €4.8bn less than what we saw in September – given widespread political uncertainty and a lack of any obvious market trends.
Equity inflows slowed to just €386m, after another strong month for US equities (€2.2bn) and further signs of renewed interest in European equities (€1.7bn) were offset by a terrible month for global equities (-€3.4bn).
Fixed income ETF inflows halved in the rising rate environment (€701m), with investment-grade corporate bonds slumping to their worst month ever (-€1.3bn).
Is sentiment on Japan finally turning?
Sentiment on Japan equity ETF flows may be turning.
Monthly outflows have ceased for the first time since February. There are even some small inflows of €220m. This could be seen as the start of a turnaround – given improving PMI results (see graph below) and a better overall environment for equities.
And, while the country’s economy is unlikely to do anything other than move in line with moderating global growth, the corporate sector remains healthy.
Cheap valuations and undemanding earnings expectations for next year should support and sustain a recovery in equity prices after the sell-off, especially if JPY weakens further.
As for the choice of investment vehicle, ETF flows may be supported by the more favourable environment for passive as correlations are currently high and sector dispersion is low.
Year-to-date, only 30% of active Japan equity managers have beaten their benchmark