• The Aussie ETF industry fell 1.4% or -$1.9 billion month on month and ended April at $133.5 billion
  • Top performing ETFs last week invested heavily in China tech stocks
  • Local crypto ETFs launch in week where almost $300 billion wiped from sector

Economic volatility has caused a hit to the Aussie ETF industry, which dropped in value in April reflecting falls in global equity markets, according to Betashares latest monthly report.

As Australians anticipated the first interest rate hike in more than 11 years to combat rising inflation, the ETF industry followed global sharemarkets, declining in April along with a fall in trading volume.

Following March in which the industry grew in size and not withstanding positive net flows, the ETF industry fell 1.4% or -$1.9 billion month on month and ended April at $133.5 billion.

The April fall represented the third month out of four in 2022 in which the ETF industry has declined.

East period & investor caution hits trading volumes

The Easter period and overall investor caution caused trading values to plummet to levels not seen in the last 11 months, representing a fall of 35% month on month with $7.5bn in total.

The Easter period typically has subdued volumes. Net inflows for the month were $1.2 billion, a level similar to March at $1.3 billion.

Top 5 Category inflows (by $) – April 2022

Industry flows were very similar to those recorded in March, with international equities continuing to see the greater share of inflows,  followed by Australian Equities.

Top Category outflows (by $) – April 2022

According to the report, there was some profit taking in short exposures which experienced strong positive performance as sharemarkets fell.

Industry fall due to asset value reduction

Betashares chief commercial officer Ilan Israelstam said when looking at the growth of the ETF industry investors must be careful to separate between change in underlying value of the securities versus the amount of capital that investors are actually investing.

“So, while the industry value fell in April, it was entirely due to a drop in the asset value, rather than investors actually pulling money out,” Israelstam said.

“In fact, notwithstanding significant market volatility investors continued to invest more money into exchange traded funds during April.”

Israelstam said the fact net flows were similar to March was a positive sign.

“While the total industry size dropped in April due to the decline in global markets, it is pleasing to see that investors are continuing to use ETFs as a long-term investment tool in all market conditions,” he said.

He said the decline in asset values reflected falls in global sharemarkets following ongoing geopolitical uncertainty, as well as continued concerns over increasing inflation and official interest rates.

“Despite these lingering concerns, we expect that investment flows to ETFs will continue to be strong as the year continues, as investors take advantage of the convenient and cost-effective nature of ETFs,” he said.

 

And then there’s China

We can’t write an ETF wrap without looking at China. Stockhead’s  China go-to guy Christian Edwards noticed in their latest week ending May 13 update, ETF Securities is asking the eternal question – have Chinese tech stocks, and the giants that once ruled them like Alibaba and Tencent, finally bottomed out?

According to Christian, one may tempted to draw that particular conclusion looking at last week’s top performing ETFs.

Image ETF Securities

Yep. Four of the top 10 performing ETFs – IAA, IZZ, CNEW, GAME – are seriously invested in Chinese tech companies. Now Chinese tech has a fair few tailwinds – not least is the apparent determination across Chinese policymakers to ease the year-long regulatory scrutiny and stock-whacking that has dogged the sector and weighed more broadly on the markets.

Of course the other doozie here, as ETF Securities’ head of product management and development Evan Metcalf points out, is the positive signals coming out of Shanghai for the first time in what seems forever.  Those China-facing ETFs, Metcalf said, could also be benefiting short-term from the Shanghai lockdown as investors anticipate an opportunity.

Oh and don’t forget crypto ETFs

Australia’s crypto ETFs felt the fallout of the sector last week which saw almost $300 billion wiped out and sent the prices of Bitcoin and Ethereum plummeting. Investors became spooked and quick to offload their crypto assets after the collapse of two key stablecoins.

It was another dire week for the BetaShares Crypto Innovators ETF – CRYP (ASX:CRYP), which lost 20.8% of its value. CRYP’s year-to-date performance was down ~57%.

The first trifecta of the Aussie crypto-ETFs (exchange-traded funds) hit the Cboe Australia exchange during that horribilis week.

The Cosmos Purpose Bitcoin Access ETF (CBTC) garnered inflows of just above $454k; by the end of trade on Friday, that had grown by 15%.

The ETFS 21Shares Bitcoin ETF (EBTC) and ETFS 21Shares Ether ETF (EETH) garnered inflows of $955k and $604k, respectively.

ETF Securities’ Kanish Chugh didn’t seem too concerned at the time, even saying the sell-off could present an opportunity.

“Australian investor interest in cryptocurrencies has not waned in recent months even as we have seen underperformance,” Chugh said.

“And with Bitcoin’s recent sell-off as well, it may present an opportunity for investors who have been looking for attractive entry points into this new asset class.”