Best and Worst Performing ETFs in June

JUNE 2022 update: China funds were back at the top of the leaderboard, but crypto funds fell sharply

Valerio Baselli 5 July, 2022 | 10:40AM
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Best Performing 

According to Morningstar Direct, the top 15 of ETPs in June speak almost exclusively Chinese. The ranking is led by the Global X China Electric Vehicle and Battery UCITS ETF (CAUT), which is exposed to a basket of 20 Chinese companies that produce electric vehicles, or their components such as lithium batteries, battery production equipment and battery materials such as lithium and cobalt. This ETF was up more than 28% in June.

There are also several trackers exposed to the technology sector. After industry giants such as Alibaba (BABA) and Baidu (BIDU) reported better-than-expected quarterly results, Chinese internet stocks are experiencing a real change in market sentiment, with investors attracted by low valuations and the search for performance at a time of a bear market in the US and Europe.

The renewed interest in the Chinese equity market is also driven by the hope that the government will finally implement measures to revive the economy, which has been held back by the pursuit of zero Covid in 2022. On June 27, the People's Bank of China injected a total of 100 billion yuan (around $15 billion) into the banking system via repos – the largest daily injection in the second quarter – in order to ease the pressure resulting from the increased demand for liquidity towards the end of the first half of the year.

“The worst should be over for Chinese tech stocks,” says Chelsey Tam, Asia senior equity analyst at Morningstar. According to the expert, China has learnt several lessons in this last period and going forward as lockdown eases the government will probably rollout stimulus in monetary policies and also fiscal policies. As per the country's big internet giants’ results, “they may surprise on the upside because these companies are now less focused on growth and more on profitability”.

The momentum of the alternative energy sector and in particular of those investment solutions specialised in solar continued. In 17th place in the ranking of the best performing ETPs for the month of June is the Global X Solar UCITS ETF (RAYZ), with a monthly performance of 11.5%. The fund tracks the Solactive Solar v2 Index, which has 50 components and is designed to give exposure to major companies active in solar energy. On May 18, the European Commission unveiled the REPowerEU package on energy saving and diversification in supply away from Russian fossil fuels, as well as accelerating the green transition.

Worst Performing 

The ranking of worst performing ETPs in June saw – again – only instruments exposed to digital assets as blockchain or cryptocurrencies.

The entire crypto ecosystem is under pressure, as evidenced by the fact that Bitcoin fell below the $20,000 mark at the end of the month, breaking a key technical level. With a loss of over 37 percentage points, June was the worst month since 2011 for the most popular crypto. It should also be noted that Bitcoin - traditionally thought to be uncorrelated to equity markets - plunged in parallel with US equity: the second quarter of 2022 was the worst since 1970 for the S&P 500, while the Nasdaq recorded its weakest half-year since 1998. With a loss of 52% in June, 21Shares Aave ETP was the worst performer.

Meanwhile, the European Union seems to have found common ground on the proposed law that aims to regulate the cryptocurrency market, known as Markets in Crypto-Assets or MiCA. The news was confirmed by the Commission via its Twitter profile, and it has already provoked a series of mixed reactions on social networks (just read the comments below the tweet).

“This landmark regulation will put an end to the crypto wild west and confirms the EU’s role as a standard-setter for digital topics”, French finance minister Bruno Le Maire said in a statement. “MiCA will better protect Europeans who have invested in these assets, and prevent the misuse of crypto assets while being innovation-friendly to maintain the EU’s attractiveness”, he added.

Among the requirements that will be imposed on CASPs (Crypto Asset Services Providers) under the new rules there will be legal liability for companies in the event of the loss of their customers' crypto-assets, as well as new requirements to prevent market manipulation and insider trading and new rules on the environmental and climate impact of cryptocurrencies.

The bill will have to be formally approved by the Council and the European Parliament before coming into force.

The Biggest

Monthly top and flop performers often coincide with very volatile and therefore risky products, which should play a satellite role in your portfolio. Below you have an overview of the biggest European-domiciled ETPs in terms of assets, which could be more appropriate to consider among core holdings. Performances in June 2022 go from -6.7% of the iShares Core FTSE 100 UCITS ETF (ISF) up to the iShares $ Treasury Bond 1-3yr UCITS ETF USD (IBTS), which gained 1.8% last month.  

Methodology

According to Morningstar data, there are about 80 percentage points between the best and worst performing European exchange-traded products (ETPs) in June, with returns for the month ranging from 28.3% to -52.6%.

We have looked at the key trends in the sixth month of the year, excluding inverse and leveraged funds. These instruments, being purely passive products, reflect the evolution of the markets without the bias (good or bad) of an active manager.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Valerio Baselli

Valerio Baselli  is Senior Editor at Morningstar.