European ETF trading commentary for the week ending 29 January 2010, provided by LaBranche Structured Products Europe (LSPE).

Overall, January was clearly not the best month for ETF providers in terms of growing assets. This was certainly notable in LSPE’s primary market activity, where we registered a 3:4 creation/redemption ratio in favour of redemptions, something we haven’t seen in 15 months. Secondary market volumes were also heavily skewed towards sales by investors.

LSPE witnessed large sellers of funds tracking a range of asset classes. Funds sold heavily last week include the iShares MSCI Emerging Markets ETF (LSE: IDEM), Lyxor ETF DJ Stoxx 600 Basic Resources (NYSE Euronext: BRE), Lyxor ETF EuroMTS 10-15 (NYSE Euronext: MTE) and Lyxor ETF EuroMTS 7-10 (NYSE Euronext: MTD).

Redemption volumes reported by many ETF providers were also rather large. Most notably, the iShares DJ Euro Stoxx 50 DE (Deutsche Borse: SX5EEX) saw redemptions of US$200 million (US$118 million came from LSPE, accounting for a large chunk of our redemption orders). Meanwhile, the iShares MSCI Emerging Markets Index fund in the US (NYSE: EEM) saw its highest redemption volumes since August 2009, at close to US$1 billion, while the iShares FTSE/Xinhua China 25 Index Fund (NYSE: FXI) had redemptions of almost US$300 million.

However, we also saw some strong creations in funds such as the iShares DAX DE (Deutsche Borse: DAXEX), Lyxor ETF Russia (NYSE Euronext: RUS) and Lyxor ETF Eastern Europe CECE EUR (NYSE Euronext: CEC). We created the Lyxor ETF Russia on almost a daily basis with heavy two-way volumes (although onscreen volumes were a third lower than the previous week).

We saw buyers of inflation-linked government bond ETFs such as the iShares Barclays TIPS Bond Fund (NYSE: TIP), with investors concerned about possible signs of US inflation following last week’s figures.

In European sectors, we witnessed large sellers of the iShares DJ Euro Stoxx Banks ETF (Deutsche Borse: SX7EEX) and the Lyxor ETF DJ Stoxx 600 Basic Resources (NYSE Euronext: BRE) but large buyers of the Lyxor ETF DJ Stoxx Media (NYSE Euronext: MDA) and iShares DJ Euro Stoxx Utilities Swap ETF (Deutsche Borse: SX6REX). Investors sold trackers of most other European DJ Stoxx 600 sectors last week.

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.