Industry Updates

Telecom ETFs put under pressure

George Geddes

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ETFs with exposure to the telecommunication sector had a negative performance last week as Facebook’s and Disney’s share prices tumble in the US as well as Deutsche Telekom and Vodafone doing the same in Europe.

Over the course of last week, the likes of SPDR MSCI World Communications Service UCITS ETF (WTEL) and Xtrackers Stoxx Europe 600 Telecommunications Swap UCITS ETF (XSKR) saw their net asset values (NAV) fall 1.9% and 1.6%, respectively, as the ETFs’ top holdings dipped.

WTEL’s near 2% fall comes in the same week which saw two of its largest holdings, Facebook and Disney, slip 2.7% and 3.6%, respectively.

Facebook, which accounts for 13.9% of the fund, saw its share price fall as its new cryptocurrency project, Libra, went under fire at multiple congress meetings last week.

The social media giant was scrutinised for its previous data breaches as it bids to take in more personal, financial data from its users as well as there still being a lack of clarity behind the structure of the digital coin which shows similarities to an ETF. However, the platform is said to be announcing its second most profitable quarter later this week so is expected to see its share price recover.

Disney, which makes up 7.3% of the fund, had a rather significant drop after having a strong performance this year so far. Year-to-date, Disney has seen its share price rise 28.5%, despite last week’s dip.

But similar to Facebook, the value is expected to bounce back even further after the expected success of The Lion King which recently launched as well as the latest Avengers movie overtaking Avatar as the top box office movie of all time.

In Europe, Deutsche Telekom, accounting for 19.5% of XSKR, and Telefonica, accounting for 13.8%, were the biggest anchors in the ETF’s performance last week.

Deutsche Telekom’s share price fell 2.6% following the news the company lost a legal battle with the German regulator for its all-you-can-watch mobile video product as it was violating European roaming rules.

Furthermore, Telefonica’s share price fell despite telecom’s giant Vodafone announced it would support and allow the smaller rival to have access to its high-speed broadband network in Germany.

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