ETF Weekly Market Update

Flows, Market Snapshot and Axes…

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On Exchange Equity Turnover:

– Values above 100% indicate an above average turnover compared to either the prior 30 trading days or the prior 260 trading days.

– European equities were again favored over US/ Asian equities by investors. Financial Sectors (Banks, Insurance, Financial Services) saw soaring turnover in particular. Best performing sector was the Health Care Sector last week.

UniCredit OTC ETF TurnoverLast Week

– During the first part of last week we saw some risk reducing orders due to increased volatility. From Wednesday onwards investors reopened their positions. UniCredits ETF OTC turnover was mainly driven by selling (second half of the week buying) orders on DAX and EuroSTOXX 50 ETFs (iShares, UBS, Lyxor, db x- trackers) as well as ETFLab EUR Government Germany 1-3 (ETFSG13) and iShares Global Infrastructure (XSGI). Additionally, we saw buyers of iShares eb.rexx Government Germany (RXRGEX) and Lyxor Turkey (TUR).

– Top iShares fund inflows were in the iShares MSCI Emerging Markets (IEEM) with USD 415mn and iShares Barclays Capital $ Treasury Bond 1-3 (IBTS) with USD 218mn. Top fund outlows were in iShares EURO STOXX 50 (DE) (SX5EEX) with USD 205mn and iShares Markit iBoxx Euro Corporate Bond (IBCX) with USD 127mn.

Fundamental Highlights

Escalating market concerns about the future of the EMU were successfully contained by aggressive market intervention of the European Central Bank. Trader reports suggest that the ECB has ramped up its purchases of EMU periphery bonds quite substantially over the past few days. Spreads compressed by up to 150bp (10-year Portugal-Bund spread). During the press conference, Trichet did not back down on market pressure to announce a fixed target for the central bank’s bond purchases. Instead, the ECB postponed its exit strategy and will provide unlimited liquidity at 3-month tender operations over the coming three months at least. The spread tightening in EMU periphery bonds had an outstandingly positive impact on virtually all risky asset markets around the globe, which experienced a fantastic start into the month of December. Only the awful US labor market report on Friday with only 39k new jobs and a pick-up in the unemployment rate from 9.6% to 9.8% caused a moderate correction in risky asset markets. Over the weekend, Fed Chairman Bernanke said that against the background of weak growth and high unemployment additional purchases of bonds would certainly be possible. In thinner markets, this week will be dominated by the EU Heads of States meeting and possibly delayed ramifications of the US labor market report. With 10-year Portuguese yield spreads to Bunds down to 300bp from 450bp earlier last week, we don’t see the case for the country to immediately be pressed for, or to ask for, support through the EFSF. Whilethesituationlookedquitestrainedjust sevendays ago, it now seems as if the EMU debt crisis won’t require any further rescue operation over the remainder of this year. However, we are extremely cautious, not being carried away by current market enthusiasm. The positive mood can quickly evaporate and the risk of facing the same questions of the past few weeks again early next year is fairly high. Data-wise, this week will be relatively uneventful.

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Source: ETFWorld – Corporate & Investment BankingUniCredit Bank AG

– Valuesabove100% indicatean above average turnover compared to either the prior 30 trading days or the prior 260 trading days.

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