ETF Edge, January 22, 2024

Introduction

• The US stock market is at new highs, but international flows are inconsistent.
• India and Japan have seen significant inflows into their ETFs, while China has experienced stagnant or decreasing flows.
• Dave M, the global head of products and Capital markets at Franklin Templeton, and Mike Akens from ETF Action are here to discuss these trends.

India and Japan

• India has been a hot country for ETF investments, with Franklin Templeton's fund bringing in about $600 million over the last year.
• India's strong GDP growth and increasing middle-class investments contribute to its appeal as an emerging market.
• Japan has also seen inflows, with investors interested in gaining exposure to the country's market and well-known companies like Toyota and Sony.

India's Competition with China

• India is emerging as a manufacturing competitor to China but still has a long way to go.
• Concerns about investing in India as an anti-China play exist due to the political and economic differences between the two countries.

Japan's Growth Story

• After years of stagnation and deflation, Japan is now showing signs of growth with more pro-growth policies.
• The country's valuations are more depressed compared to other markets, making it an interesting investment option.

Flows in China

• China's flows have been flat to down as its market hits multi-year lows.
• The political situation in China and elevated valuations are causing investors to flee the market.
• The Shanghai and Shenzhen indexes have not changed significantly in 17 years, despite the country's growth.

Bitcoin ETFs

• The recent launch of Bitcoin ETFs has received attention.
• The ETFs have been tracking the price of Bitcoin and have seen around $4 billion in inflows.
• The impact of Bitcoin ETFs on the grayscale Bitcoin Trust (GBTC) remains to be seen, as there have been substantial outflows from GBTC.

Future Trends

• There may be a demand for adding Bitcoin ETFs to model portfolios and asset allocation funds, although some suitability issues need to be considered.
• It is still uncertain how soon Bitcoin ETFs will appear in model portfolios due to regulatory concerns.
• Research is ongoing to analyze the impact of adding Bitcoin ETF exposure to portfolios and its effect on volatility and risk measures.

Conclusion

• The international ETF market is experiencing varying flows, with India and Japan attracting investors while China sees decreased interest.
• The launch of Bitcoin ETFs has generated significant inflows, but their long-term impact on the overall market is uncertain.
• Further research is needed to determine the suitability and potential inclusion of Bitcoin ETFs in model portfolios.