Industry Updates

ETF investors buy the dip following turmoil in US tech stocks

US equity ETFs saw $983m inflows last week

George Geddes

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Investors piled into US equity ETFs last week following the significant drop in US tech stocks, a sign of belief the turmoil will be short-lived.

According to data from Bloomberg, European-listed US equity ETFs saw $983m inflows in the week ending 4 September.

In particular, the Amundi S&P 500 UCITS ETF (500U) and the iShares Core S&P 500 UCITS ETF (CSPX) accumulated $355.3m and $114m inflows, respectively, according to date from Ultumus.

The inflows come after the Nasdaq 100 index fell by more than 5% in a single day last Thursday after Apple and Tesla, in particular, suffered.

Notably, Apple's share price fell by more than 8% on Friday after climbing 75% since the beginning of the year, a $179bn loss for the $2trn company.

The iShares S&P 500 Information Technology UCITS ETF (IUIT), which is comprised of technology stocks within the S&P 500, including Apple, has outperformed 500U by 20.6% YTD.

In the US, investors are slightly more reactive to buying and selling ETFs compared to their European counterparts. The SPDR S&P 500 ETF Trust (SPY) saw outflows worth $2.5bn last week, although this only accounts for 0.8% of the fund.

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Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, told ETF Stream: “It is important to note that SPY is really concentrated, meaning only a few names lead the ETF, so if you take out those stocks, it is not that broad based and would probably look more like Europe.

“Additionally, it has been mostly been led by the technology sector, and the weighting for tech stocks in Europe is much smaller than in the US.”

In Europe, technology stocks are not a common appearance in the leading indices and have therefore struggled to recover and gather new assets into ETFs tracking them which has been seen in the US.

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In tandem with US equities attracting $983m inflows, Europe equities only managed to attract $269m even with a home bias. 

The $3.7bn UBS ETF MSCI EMU UCITS ETF (EUGBPD) saw $22.7m in outflows.

The MSCI EMU index has fallen by -4.2% year-to-August with 12.7% of the index being comprised of information technology stocks.

The representation of technology stocks in the UK is even smaller, with only 3 constituents accounting for just 0.9% of the index.   

For the US, volatility could still be a factor, especially as we approach the US election. The VIX, a common measure of volatility in the US stock market, has started to rise again after what has been a relatively undisrupted summer period.

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