Global commodity ETP assets under management (AUM) rose 33% year-on-year to reach US$171bn at the end of 1H 2011, with on-exchange average monthly trading turnover nearly doubling year ago levels to hit US$167bn. These findings come from today's publication of ETF Securities' Global Commodity ETP Quarterly, Q2 2011, a comprehensive guide to investing in global commodity ETPs.
Key findings from ETF Securities' Global Commodity ETP Quarterly for Q2 2011 include:
- Global commodity ETP assets stood at US$171bn at end of June 2011, up 33% on the year.
Global commodity exchange traded product (ETP) 1 assets stood at US$171bn at the end of June 2011, 33% above year-ago levels as investors continue to increase weightings in the asset class. Assets are nearly triple end-2008 levels. - Trading turnover surges 95% over year-ago levels, hits all-time monthly high in May
Commodity ETP average monthly stock-exchange traded turnover soared 95% over the same period last year to average US$167bn in 1H 2011 and hit a record monthly high of US$264bn in May. Silver ETPs saw a particularly sharp rise in trading in reaction to COMEX silver future margin hikes, with turnover hitting an all-time high of US$123bn during the month. Gold ETPs followed with a total of US$97bn traded during the month. - Commodity ETP assets drop US$20bn in May and June on growth concerns . . .
The rise in commodity ETP assets has not been straight-line, with a strong rise in assets to an all-time peak of US$191bn in April of 2011 followed by a US$20bn decline in May and June. Weakening global growth indicators, together with reduced risk appetite stemming from spreading sovereign risk in Europe, caused prices to fall and investors to cut back their risk positions. - . . . and a near doubling of Comex Silver futures margins
ETP flows in April and May were also substantially affected by the surprise near-doubling of margin requirements on COMEX silver futures positions over the period. The margin hikes helped push the silver price down nearly 30% in May and drove around US$3.4bn out of silver and gold ETPs during the month. In June markets stabilized and commodity ETP flows became more balanced. - 2H 2011 performance and flows dependent on growth and sovereign risk developments
The two main factors that may drive commodity ETP performance and flows in 2H 2011 are perceptions of the sustainability of the global economic recovery and whether sovereign debt risks can be contained. Broad diversified and cyclical metal commodity ETPs may benefit the most if it turns out the slowdown in global growth in the second quarter was a temporary "soft patch". Gold ETPs, on the other hand, may benefit most if Europe does not quickly find a convincing solution to its sovereign debt problems or if a renewed need for quantitative easing to offset slowing growth rekindles US dollar debasement concerns.
Commenting, Nicholas Brooks, Head of Research and Investment Strategy at ETF Securities, said:
"Commodity ETP flows in the first half of 2011 were extremely uneven, with January and May alone experiencing nearly US$7bn of outflows while all other months saw inflows except June, which was broadly flat. The outflows in January and May reflected exceptional commodity-specific events. The bulk of the outflows in January were accounted for by US$3.2bn of outflows from gold ETPs as investors revised up growth and interest rate expectations and re-allocated into cyclical assets in the New Year. In May commodity ETP flows were substantially affected by the surprise near-doubling of margin requirements on COMEX silver futures positions. The margin hikes helped push the silver price down nearly 30% in May and drove around US$3.4bn out of silver and gold ETPs during the month. Excluding those two months, global commodity ETP average monthly inflows were around US$2.3bn in 1H 2011, up 44% from average monthly inflows of US$1.6bn in 2H 2010. In 2H 2011 the two main factors that may drive commodity ETP performance and flows are perceptions of the sustainability of the global economic recovery and whether sovereign debt risks can be contained. Broad diversified and cyclical metal commodity ETPs may benefit the most if it turns out the slowdown in global growth in the second quarter was a temporary "soft patch". Gold ETPs, on the other hand, may benefit most if Europe does not quickly find a convincing solution to its sovereign debt problems or if a renewed need for quantitative easing to offset slowing growth rekindles US dollar debasement concerns."
To view the key findings please click here to view the presentation