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Market Update - January 2021

With new market statistic out from the ASX we can see that ETF funds under management in Australia continued on its upward trajectory to now sit at $96 billion as at the end of January 2021. At this rate we would expect $100 billion to be hit by March/April, a significant milestone for Australian ETFs.

This growth has been pushed up by the Magellan Global Fund Open Class ETF (MGOC) which was added in November last year along with its $12bn worth of holdings at the time. Some may argue that this artificially inflates the market but even if you take that out, the market grew to $82 billion which is not an insignificant amount if you look at where we were in previous years (end of Jan 2018 was $36.2 billon, Jan 2019 was $42.3 billion, Jan 2020 was $65.7 billion). The dip experienced in March has more than recovered and ETFs are growing strength to strength.

Another area often looked at is Net Inflows and in January we saw VAS, IOZ and NDQ make up the top 3 ETFs. This is typical as these funds often make up what is part of the "core" of a core/satellite type portfolio that many investors go for. So it's not unusual to see them at the top. In the rest of the top 10 there were some notable performers from the ESG space. ETHI and FAIR (both from BetaShares) had $59 million and $36 million of inflows in the month and this showcases the continued growth and popularity of ESG related ETFs.

ETHI tracks the Nasdaq Future Global Sustainability Leaders Index which has a number of household names in its holdings base. These include Apple, nVidia, Tesla and Paypal for example. Tesla is interesting because at one point in time - end of 2019/early 2020 - it was ranked highly on ESG ratings by index provider MSCI but on the FTSE ESG ratings it was lower. ESG does depend on how holdings are being screened, either exclusionary (avoiding certain sectors or stocks) or postively (highlighting leaders in specific ESG related areas).

What's important is for investors to look at underlying holdings which they can typically do through the PCF (portfolio composition files) updated regularly by ETF issuers. They can also subscribe to the abundance of materials provided by ETF issuers each week, month quarter. There is a tonne of information out there.

For more on ESG and how it performed in 2020, check out our article here: The Rise of ESG Investing in Australian ETFs.

Next we jump to total returns and according to the exchange data, the overall market was only slightly up in January at 0.4%. The best performing area (based on thematics) was technology and out of the bunch we saw BetaShares again take top billing with its Asia Technology Tigers (ASIA) ETF.

ASIA consists of some well-known names that even Western investors may be aware of. This includes (ecommerce), Baidu (search engine), Alibaba (world's largest retailer), Tencent (social media), Samsung (electronics) and Taiwan Semiconductor (you can guess what they do). Most of these names saw positive performances in January and are up YTD (Alibaba is up +17% at the time of writing). The largest holding in ASIA is Taiwan Semiconductor which just saw news come out that it struck a deal with Apple to create mini OLED screens for AR (augmented reality) devices.

The chart below was created by taking a look at the January performance of the technology themed ETFs and we can see that ASIA was a turnaround story in a way. It typically lagged the other ETFs at the beginning of each year but 2021 sees it off to a flying start. We'll see how it keeps up the pace going forward.

For insights on how to use the app check out the Using the App section on the blog.

Also, you can access the main ETFtracker App which we update each month in the Apps section on this site. If you're on your phone you can only see the mobile friendly app which has less features so hop on to your desktop to see more.

You might also notice the New Era Analytics logo at the top of the charts here. That's my new company that I just started this week that will house and update/maintain the ETFtracker app and site. You can learn more about it here:

If you have any questions or want to talk about any of the above then feel free to get in touch. Happy trading!

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