European ETF trading commentary for the week ending 15 January 2009, provided by LaBranche Structured Products Europe (LSPE).

Although the equity market lost around 2% last week, LSPE was only involved in creations with ETF providers. Our creations were large and over half were in emerging markets ETFs.

Our secondary market flows were also strong, thanks to decent two-way trading in liquid ETFs such as the iShares S&P 500 Index Fund (LSE: IUSA) and the Lyxor ETF CAC 40 (NYSE Euronext: CAC). There were also strong flows in various DJ Euro Stoxx 50 ETFs such as the Lyxor ETF DJ Euro Stoxx 50 (NYSE Euronext: MSE), the iShares DJ Euro Stoxx 50 ETF (Deutsche Borse: EUN2) and the iShares DJ Euro Stoxx 50 DE (Deutsche Borse: SX5EEX), which saw US$139 million in creations. Surprisingly, the overall ETF market was biased towards buyers.

Demand for dividend funds cooled but our traders still sold large amounts of the iShares Dow Jones U.S. Select Dividend DE ETF (Deutsche Borse: DJDVPEX) – again supported by large orders made by LSPE (iShares reported US$44 million) – and the iShares FTSE UK Dividend Plus (LSE: IUKD), which also accounted for large creation orders.

LSPE sold large blocks of funds tracking Russia and Turkey – such as the Lyxor ETF Russia (NYSE Euronext: RUS) and Lyxor ETF Turkey EURO (NYSE Euronext: TUR) – as well as the Lyxor ETF Eastern Europe CECE (NYSE Euronext: CEC). We had large creation orders for the Lyxor ETF South Africa FTSE JS (NYSE Euronext: AFS), and despite slightly less momentum, iShares reported creations of up to US$46 million in funds tracking Korea.

Property ETFs were sold off on short-term profit taking, with iShares reporting redemptions of US$33 million. Meanwhile, although ETFS Corn (LSE: CORN) lost 13.5% in 10 days, demand for the ETF remains strong and creation orders are still being made on a daily basis.

We saw profit taking in the telecom sector (SXKP), which fell 1.6%, followed by decent redemptions in funds tracking the index. However, there was renewed interest in the Lyxor ETF DJ Stoxx 600 Oil and Gas (NYSE Euronext: OIL) and in funds tracking the banking sector (SX7P), such as the iShares DJ Stoxx 600 Banks DE ETF (Deutsche Borse: SX7PEX) and the Lyxor ETF DJ Stoxx 600 Banks (NYSE Euronext: BNK). Meanwhile, new energy trackers such as the Lyxor New Energy ETF (NYSE Euronext: NRJ) were again in demand and LSPE sold good amounts to investors.

Finally, please note that the Australian stock exchange will be closed on Tuesday 26 January, which will affect Australian ETFs such as the db x-trackers S&P/ASX 200 (LSE: XAUS).

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.