ETF Express: Week Ending 13 October 2023

ETF Express is Global X’s weekly coverage of the latest ETF Market Moves, Thematic Spotlight and Commodity Calls.

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• Physical gold and gold mining ETFs (GDX, GOLD, MNRS, NUGG) were the top performing funds last week as investors sought out safe-haven assets due to the possible escalation of the Israel-Hamas war.
• Crypto ETFs (CRYP, EBTC, EETH) performed poorly after the North American Securities Administrators Association (NASAA) supported the SEC’s case in its lawsuit against Coinbase that began in June. NASAA’s general counsel defended the SEC’s stance, stating digital assets should not dodge traditional investment rulings despite its status as a new asset class.
• There were $372 million in reported inflows for the week, and only $144 million in outflows, marking a week of net inflows for the Australian ETF industry.

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Canon Challenges ASML Monopoly as Chip Demand Recovers

Semiconductors and IoT

Canon Inc. has reportedly begun selling a low-cost alternative to ASML’s extreme ultraviolet lithography (EUV) machinery for manufacturing semiconductor chips.¹ The Japanese camera manufacturer has historically struggled to keep pace with ASML’s developments in EUV, leaving the European tech company without competition in the lithography machine industry. However, recent improvements in Canon’s nanoimprint lithography (NIL) technology has seen competition prop-up for the first time in the previously monopolised 5-nanometer semiconductor space.

Unlike ASML’s EUV technology which uses ultraviolet lasers to carve out razor-thin channels, Canon’s NIL impresses chip designs onto silicon wafers in one go.² Canon says the new approach should provide a cheaper and lower power solution thanks to its simpler process, but previous testing has shown high rates of defects and the company is yet to confirm the issue has been resolved.³ Nonetheless, should the new technology prove effective, it would mark the first time a company other than ASML has been capable of reliably manufacturing at the 5-nanometer scale.⁴

ASML has seen orders and revenue surge five straight quarters to date, and the company remains the world’s go-to supplier for chipmaking machinery. With signs appearing across the industry that the chip industry’s year-long demand slump is bottoming out,⁵ Canon’s new addition to the semiconductor industry will be one to watch.

Explore semiconductors with SEMI.

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Precious Metals

Bullish

• Investors increasingly expect the US Fed is done raising rates. The Fed’s latest meeting minutes suggested rates will likely stay high for “some time” to lower inflation.⁶
• The ongoing war between Israel and Hamas has increased geopolitical concerns in the Middle East, buoying safe haven investments.⁷

Bearish

• September US CPI inflation was higher than expected, supporting the Fed’s intention to maintain higher rates for longer.⁸

Explore precious metals with ETPMPM.

Uranium

Bullish

• Turkey plans to generate electricity from the first reactor at Akkuyu nuclear facility next year and commission the entire plant within 3-4 years.⁹ Once completed, the Akkuyu complex will supply 10% of Turkey's power. In the long term however, Turkey's energy plan calls for a nuclear capacity of at least 20 gigawatts, four times the Akkuyu plant’s output.

Bearish

• Kazatomprom, the world’s largest uranium producer, has approved plans to increase production volumes by 2025. Driven by a “strong contract-book and growing sales portfolio”, the company is looking to return to 100% output and beyond for the first time since its down-scaling in 2017.¹⁰

Explore uranium and nuclear energy with ATOM.

Copper

Bullish

• Positive PMI data in the US is highlighting the resilience of manufacturers,¹¹ suggesting industrial metals demand could remain strong despite restrictive monetary policies.
• Expectations grew that the Fed is done raising rates. The Fed's latest meeting minutes showed officials said rates should stay high for “some time” to lower inflation.¹²
• China may be getting ready to launch another wave of stimulus to help the economy fulfil the official growth targets.¹³ The government is considering increasing its budget deficit for 2023.

Bearish

• Copper inventories on the London Metal Exchange spiked to their highest level in nearly two years, alleviating buyer pressure from persistent supply restrictions.¹⁴
• September US CPI inflation was higher than expected, supporting the Fed's intention to maintain higher rates for longer.¹⁵

Explore copper with WIRE.

^{Forecasts are not guaranteed, and undue reliance should not be placed on them. This information is based on views held by Global X or referenced sources as at 17th October 2023.}