Based on the Scotia ETF EDGE reports from July 1 to Aug. 2, spanning a five-week period, Canadian ETFs saw an inflow of $7.6-billion. Equity ETFs topped the month with net creations of around $4.1-billion while Inflows in fixed income decreased compared to the previous month, accounting for $1.6-billion. Cash saw inflow of nearly $0.19-billion. Crypto bounced back from last month’s exodus with net creations of $99 million.
U.S. Fed chair Jerome Powell opened July with the a semi-annual policy report. Reading the tea leaves, Mr. Powell remarks that the economy is no longer overheated and that the labour market appears to be fully back in balance. Despite the optimism, the members of the FOMC voted to maintain the federal funds rate. Market reaction following the press conference was muted as analysts and observers expected a rate hold understanding that the committee are data dependent.
The CrowdStrike incident caused the company stock to feel some temporary volatility. The faulty security update resulted in millions of Microsoft’s Windows users to be impacted, leading to widespread disruptions in critical global services such as airlines, financial institutions and other industries. Tech-heavy indexes, like the Nasdaq, dropped briefly. Many investors saw this short-term market instability as a buying opportunity.
Other major news for July were on the political front. Former U.S. president Donald Trump became the official nominee for the Republican Party after surviving an assassination attempt and President Joe Biden dropping out of the presidential race. Government policies and regulations has a significant impact on economic activities. Change creates uncertainty that the market will have to navigate through, however, Mr. Biden’s withdrawal appeared to have little effect on Wall Street as U.S. equities ends the month in the positive.
Investors remain bullish on equities with the Vanguard S&P 500 Index ETF (VFV-T) and BMO S&P 500 Index ETF (ZSP-T) raking in a combined inflow of $1.4-billion. The Quadravest Preferred Split Share (PREF-T) experienced the largest inflows in a single ETF with $0.9-billion. In July, Investors continued to move towards high quality investments in the broad market indexes of the U.S.
Simultaneously, investors lowered their positions in Canadian broad market Equity ETFs. BMO Equal Weight Banks Index ETF (ZEB-T), BMO S&P/TSX Capped Composite Index ETF (ZCN -T) and iShares S&P/TSX 60 Index ETF (XIU-T) were the highest outflows for the month.
Additions
In July, the Canadian market witnessed the introduction of 16 new ETFs, predominantly brought forth by two providers: CIBC Asset Management, and BlackRock Asset Management Canada Ltd.
CIBC ETFs
CIBC launched nine new fixed income ETFs this month, listed on the Cboe exchange. The CIBC 2025-2030 Investment Grade Bond Funds (CTBA-NE, CTBB-NE, CTBC-NE, CTBD-NE, CTBE-NE and CTBF-NE) offer exposure in Canadian Investment Grade bonds with maturity date as their target year. CIBC also launched similar ETFs with exposure in US based Investment Grade bonds, namely the CIBC 2025-2027 U.S. Investment Grade Bond Fund (CTUC-U-NE, CTUD-U-NE, CTUE-U-NE).
Blackrock ETFs
Blackrock added three new equity ETFs to their list of offerings.
iShares S&P 500 3% Capped Index ETF (XUSC-T) seeks to mitigate issuer and sector concentration risks while providing exposure to the S&P 500 stocks. It balances market exposure, concentration risks, and turnover, aiming for long-term capital growth by tracking the S&P 500 3% Capped Index. The USD (XUSC-U-T) and hedged (XSPC-T) versions were also launched.
Other ETF Launches
BMO US Equity Buffer Hedged to CAD ETF – July (ZJUL-NE) aims to provide income and growth by investing in BMO S&P 500 Hedged to CAD Index ETF, which tracks the S&P 500 Hedged to Canadian Dollars Index, while offering protection against the first 15 per cent of losses on the invested ETF over the Target outcome period. The yearlong period starts in July and ends in June the following year.
CI Global Unconstrained Bond Fund ETF (CUBD-T) aims to deliver income and potential long-term capital appreciation. The fund invests in a broad range of fixed-income securities issued by companies and governments of various sizes and credit qualities, across global markets.
CI Global Short-Term Bond Fund ETF (CGSB-NE) seeks to reduce volatility and generate regular monthly income for investors, focusing on low risk and capital safety. It provides global bond exposure to minimize interest rate risk mainly through investments in short-duration fixed-income securities and short-term notes.
Brompton International Cash Flow Kings ETF (KNGX-T) tracks the performance of the Brompton Index One Canadian Cash Flow Kings Index. This index uses a rules-based approach to invest in Canadian publicly listed companies with the highest Free Cash Flow Yields. The ETF targets high-quality companies known for strong free cash flow relative to their overall enterprise value.
Amy Mak, is senior financial analyst at Inovestor.
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