European ETF trading commentary for the week ending 25 September 2009, provided by LaBranche Structured Products Europe (LSPE).

The equity market lost around 2% last week but we saw buyers outweigh sellers by 5:3. Our net creation flows were above the €50m mark and we had a 1:1 creation to redemption ratio.

There was renewed interest in corporate bond funds such as the iShares Euro Corporate Bond ETF (LSE: IBCX) and iShares GBP Corporate Bond ETF (LSE: SLXX), in which LSPE had decent two-way flows and ended up creating on a daily basis due to strong demand. Meanwhile, demand for inflation-linked ETF products was also strong and investors bought blocks of the iShares Euro Inflation Linked ETF (LSE: IBCI) and Lyxor ETF EuroMTS Inflation Linked (NYSE Euronext: MTI).

Demand for European small cap funds remained good and we saw investments in the db x-trackers MSCI Europe Small Cap ETF (LSE: XXSC), the Lyxor ETF MSCI EMU Small Caps (NYSE Euronext: MMS) and the iShares DJ EuroStoxx Small Cap ETF (LSE: DJSC), which together accounted for a lot of our creation orders.

Turkey, India and Russia funds were again on the radar as investment banks renewed their buy recommendations on those countries; investors bought the Lyxor ETF MSCI India (NYSE Euronext: INR), Lyxor ETF India S&P CNX NIFTY (LSE: LNFT), Lyxor ETF Russia ETF (NYSE Euronext: RUS), iShares MSCI Turkey ETF (LSE: ITKY) and Lyxor ETF Turkey Euro (Euronext Paris: TUR) from us.

By sector, we saw profit taking in ETFs tracking the DJ Stoxx 600 Travel and Leisure index (SXTP), which fell 2.5% last week, and the DJ Stoxx 600 Chemicals index (SX4P), which was down 4.3% after a good rally the week before.

Demand for inverse industrial metals ETFs such as zinc and copper has increased and LSPE sold large blocks of ETFS Short Copper (LSE: SCOP) and ETFS Short Zinc (LSE: SZIC) to investors. Gold broke the US$1000 mark leading up to Yom Kippur, which could mean downward pressure on gold ETPs this week.

Don’t forget that Hong Kong is closed this Thursday, which will have an impact on all China ETFs. Finally, the iShares MSCI Emerging Markets Index ETF (NYSE: EEM) saw huge inflows last week and neared US$1bn − LSP (LSPE’s US sister company) was very active in the creation process.

This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.