Industry Updates

Equity ETFs suffer largest monthly outflows since 2010

Tom Eckett

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Escalating trade tensions between the US and China sent investors into panic mode last month with equity ETFs suffering their biggest outflows in nine years.

According to stats from Deutsche Bank, US-listed equity ETFs saw outflows of $20bn in May, the largest monthly outflows from the asset class since January 2010.

Overall, US-listed witnessed net outflows of $14.2bn with the US region suffering negative flows of $15.4bn while emerging markets saw $-4.7bn net redemptions.

Market sentiment is being driven by the ongoing Washington-Beijing trade tensions with US President Donald Trump, last month, raising tariffs to 25% from 10% on $200bn worth of Chinese goods.

Washington has also placed comms giant Huawei and its affiliates on a trade blacklist that bans US companies from supplying them. Beijing has since responded by slapping similar tariffs on $60bn of US-imported goods.

China-focused ETFs were also been impacted as a result of the tensions, seeing outflows of $1.8bn last month.

Chris Ford, portfolio manager at Smith & Williamson, commented: “The nature of the political system in China means that President Xi Jinping inevitably takes a much longer-term view than Trump, and even allowing for the current trade dispute we still expect China to eclipse the US and become the dominant global economic power in the coming years.

“Assuming Trump can extract some trade concessions from China we would expect a trade deal to be done, but at the moment an escalation of hostilities cannot be ruled out, and correspondingly we are monitoring events closely.”

Last month Vident Financial, a Georgia-based $5 billion ETF provider launched an ETF which looks to directly profit from the trade war, the Innovation Alpha Trade War ETF (TWAR).

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