ETF: “Index Funds Also Rotate” German Analyst's Perspective

Sales of technology ETFs, which have boasted high popularity for a long time, are increasing. However, in response to the recent decline, purchases are also in. There is strong demand for German mid-cap stocks and bitcoins. There is pressure to sell precious metals.

July 23, 2024 Frankfurt (stock exchange)

The positive and negative changes in the stock market are also partly reflected in the exchange-traded fund (ETF) market. Matthias Prager of Bader Bank is paying attention to the “very big sale” of iShares Nasdaq 100 (DE000A0F5UF5). This technology index has been rising at an above average pace in recent months thanks to AI Euphoria, but it has been in adjustment mode for the past 2 weeks. The reason behind this movement is that analysts who are skeptical about the high spending of companies related to AI are getting stronger.

Nonetheless, there are still many investors who want to invest in this field, and they are taking advantage of the recent setback to enter the market. At Societe Generale, corresponding index funds account for more than half of the trading volume of sector ETFs. Amundi S&P Global Information Technology ESG (IE000E7EI9P0), iShares S&P 500IT Sector (IE00B3WJKG14), and Extrackers Artificial Intelligence Big Data (IE00BGV5VN51) are popular. ETF trader Frank More sees “overall overpurchases, but there are also oversales.” In particular, Amundi MSCI World Information Technology (LU0533033667) is on the sales list.

Demand is above average in the German stock sector, and the ratio of trading volume is about 13%, which is close to 3 times normal. According to Mr. More, in addition to DAX ETFs (DE0005933931 and LU0274211480), iShares MDAX (DE0005933923) has also been bought in large quantities. “There is movement in the medium and small cap markets,” Mohr explains. Small-cap stocks have long been neglected, but according to many analysts, they have the potential to catch up. MDAX fell about 5% from the beginning of the year, while DAX rose more than 10%.

At the international level, the high level of interest in the SPDR S&P 500 (IE00B6YX5C33) stands out. According to Mr. More, this index fund known as “Spider” has collected more than 10 billion dollars since fees were cut in November. The main reason for this is savings plans. Meanwhile, at Bader Bank, Mr. Prager reports that the sales value of the US flagship fund of State Street Global Advisors has increased this time. Since the S&P 500 index is dominated by high-tech companies, this is in line with sector rotation.

Precious metals are currently falling because gold prices have failed to hit record highs. ICF Bank customers are responding to this by selling Wisdom Tree Swiss Gold Spot (JE00B588CD74). Platinum (JE00B1VS2W53) and silver (JE00B1VS3333) ETC were also sold. Trader Frank Wernitz reported that “there is a lot of pressure in this segment.” Meanwhile, 1Valour Bitcoin Physical Carbon Neutral (GB00BQ991Q22) is being bought. Cryptocurrency is also in demand at Bader Bank. In particular, the ETC Group's Bitcoin Spot (DE000A27Z304) is being bought.

In the bond sector, Mr. More showed high interest in SPDR Bloomberg 15+ Year Gilt (IE00B6YX5L24), which covers long-term British bonds. Demand for Amundi (FR0010510800) and Extractors (LU0290358497) overnight products also continues to be high. Traders saw losses in iShares Italian government bonds (IE00B7LW6Y90), where investors participate in the price performance of Italian government bonds.