ETP investors pile into gold and large caps post Brexit

gold bars and coins

Investors placed over $2.5bn in gold ETPs in the week following Brexit and also rotated from UK mid-caps into UK large caps, flows figures from BlackRock show.

Global ETP flows for June stood at $24.5bn, more than double seen in April ($11.1bn) and May 2016 ($10.7bn).

“The performer of the year still continues to be gold, with gold based ETPs accumulating $5.4bn in June, and $22bn for the year so far. Investors are seeing this as increasingly opportune given its negative correlation to global equities, and an attractive source of diversificatio,” says Ursula Marchioni, chief strategist, iShares EMEA at BlackRock.

Total inflows into gold for H1 2016 stand at $22bn.

While UK equities only saw outflows of $72m in UK equities after the Brexit vote, Marchioni says there was a “clear rotation” out of the FTSE 250 into the FTSE 100.

“With just 21% of revenues being derived from UK operations for FTSE 100 companies versus 58.6% of revenues from the domestic market for FTSE 250 companies, investors are clearly trending towards large caps given the greater exposure to internationally focused revenues amongst domestic uncertainty,” Marchioni says.

In European equities outflows were $2.1bn in the lead up to the vote, but this stabilised following the vote with the month ending with total outflows of $1.8bn.

In fixed income investors preferred longer dated treasuries at the start of the month, but turned into short dated treasuries following the referendum as the chance of a US rate hike this year slimmed.

“Investors seem to be positioning for imminent and coordinated central bank stimulus, a stance which has been implied by the central bank speeches since the Brexit vote and will be supportive of equities in the near-term,” Marchioni says.