Exchange-traded funds tumbled on Friday as volatility in global markets led investors to fear a new COVID-19 variant called Omicron.
Some ETFs with holdings that would be hurt by the wave of new editions, which health experts worry could be vaccine-resistant and rapidly spreading, had the biggest swing.
There was a $330 million iShares MSCI South Africa ETF (EZA), which held 37 stocks from South Africa, one of a handful of countries in southern Africa where the Omnicron strain had been identified. The fund dropped 6.1%.
Travel-related funds were also hit by what the new restrictions on foreign visitors could mean. For example, on Friday, the US imposed travel restrictions on eight countries: South Africa, Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi.
As a result, the $3.6 billion US Global Jets ETF (JETS), which holds 50 shares in major airlines, fell 7.2%. $310 Million ETFMG Travel Tech ETF
(AWAY), which invests in technology companies in the travel and tourism industry, dropped 6.4%.
Commodity funds were also under water. The new edition raised fears that a global resurgence of COVID-19 could reverse the economic recovery and dent demand. Prices in commodity futures are generally sensitive to the economic cycle and expected demand.
The $2.9 Billion iShares GSCI Commodity Dynamic Role Strategy ETF
(COMT), which tracks a basket of commodity futures in the energy, metals, agriculture and livestock sectors, fell 6.7%. $1.4 Billion Global Ex Uranium ETF
(URA) dropped 4.9%.
For the same reason, crude oil prices fell sharply, causing oil-related funds to bottom out. The $3.6 billion SPDR S&P Oil & Gas Exploration and Production ETF (XOP) dropped 6.8%, while the $484 million First Trust Natural Gas ETF
(FCG) was down 6.1%.
Cryptocurrencies, which are considered separate from mainstream asset classes, failed to offer a hedge. The $1.4 billion ProShares Bitcoin Strategy ETF (BITO), the first and largest bitcoin futures ETF in the US, dropped 6.1%.
Other funds investing in firms involved in the development of crypto and blockchain technology were also pulled down. $138 Million Bitwise Crypto Industry Innovators ETF
(BITQ) declined 4.8%, while the $126 million Global X Blockchain ETF
(BKCH) declined 5.3%.
On the other hand, longer-term bonds rose as fresh uncertainties pushed investors towards traditional safe havens. The $15.6 billion iShares 20 Plus Year Treasury Bond ETF (TLT) jumped 2.5%, while the $2.5 billion iShares 10+ Year Investment Grade Corp Bond ETF (IGLB) is up 1%.
Biotech-related funds also rose as markets focused on new ways to fight re-emerging COVID-19—especially if existing vaccines don’t protect against the new version.
The $342 million iShares Genomics Immunology & Healthcare ETF (IDNA), which invests in firms that could benefit from innovation and development in genomics, immunology and bioengineering, was up 1.5%; $9.8 Billion iShares Biotechnology ETF
(IBB) rose 1%.
Write to Evie Liu at [email protected]