IDEA of the month: Reducing the equity weight, shorting bonds
In this index note we reduce the equity weight from 40% to 30% after the strong recent performance of the equity markets. Equity markets …….
Sign up for our weekly Newsletter and receive the latest ETF and ETC news.
In this index note we increase our position in the “Short IBOXX Euro Sovereigns Eurozone TR Index” from 10% to 20%. Interest rate levels are close to long term record lows. Our economists expect interest rate levels to gradually normalize over the next years. This normalization of interest rate levels could be supported by high country debt levels, by improving economic growth or a rising inflation trend. The low interest rate levels could also lead to outflows out of the asset classes at some time which could also support a normalization trend. In addition, our scorecard remains negative on Fixed income. In this index note, we also buy the Utilities and the Banks sector with 5% each into our portfolio. Both sectors are clearly lagging behind in the equity rally over the last 12 months. We reduce the Dax weight from 20% to 10% and the weight of the Eurostoxx Select Dividend 30 Index from 20% to 10%.
Scorecard Asset classes
Equities continue to be the most attractive while all the other three asset classes appear negative on our Asset class scorecard.
Our Region Scorecard favour Europe and the US. Japan, Asia ex-Japan and Lat-Am are the least attractive regions, while EMEA appear neutral. According to our scorecard for European sectors, Insurance and Oil & Gas look the most attractive, while Autos, Chemicals and Industrial Goods & Services are the least favoured.
Scorecards Fixed income commodities and Forex
In the Fixed income segment, our scorecard supports Iboxx Sov. Eurozone 10-15 bonds the most, while EM liquid Eurobond looks the least attractive. According to our Commodity Scorecard, Natural Gas looks the most attractive while Precious metal group comprising Gold and Silver and Sugar find the least favour. Our Forex scorecard favours Euro, while the Japanese Yen looks least attractive.
Total AUM of all the European ETFs amounts to Euro 180bn. 65.1% of the AUM is focused on the equities followed by 14.2% on the debt and 14.2% on the commodities. On an aggregated basis, European ETFs, overall enjoyed inflows of Euro 2.4bn (1.4% of AUM) over the last month. Credit based ETFs added 6.8% to their AUM while Money market ETFs pared 8.8% of their AUM over the past month. Equity based ETFs managed to add 2.2% to their assets over the last month and 3.0% over the last three months. At the regional level, over the last month, ETFs focused on Emerging markets registered inflows of 6.2% of their AUM while the ETFs focuses on European Union managed inflows of 4.9% of their AUM.
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively «Deutsche Bank»). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information. Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement.
As a result of Deutsche Bank’s recent acquisition of BHF-Bank AG, a security may be covered by more than one analyst within the Deutsche Bank group. Each of these analysts may use differing methodologies to value the security; as a result, the recommendations may differ and the price targets and estimates of each may vary widely.
Deutsche Bank has instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for «Hold» rated stocks having a market cap smaller than most other companies in its sector or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http://gm.db.com to determine the target price of any stock.
The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in currency other than an investor’s currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis.
Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor’s home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorized by the BaFin.
This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch, and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this
report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank’s prior written consent. Please cite source when quoting.
Source: Trading Ideas ETF: Ideas and Flows – Deutsche Bank AG