(Reuters) – Exchange-traded funds tracking automakers experienced net outflows in the previous month due to concerns over the United Auto Workers’ (UAW) strike against the “Detroit Three” and rising interest rates.
Production at General Motors, Ford, and Stellantis, the parent company of Chrysler, have been severely impacted by the 20-day UAW strike.
Last month, the First Trust Nasdaq Transportation ETF, which includes GM as one of its top holdings, recorded net outflows of $11.6 million. This is a significant increase compared to the $3 million outflows experienced in August, as stated by Lipper data.
Bryan Armour, the director of passive strategies research for North America at Morningstar, explained, “Investors are being cautious about holding automaker stocks right now given the uncertain outcome and length of the strike. The redemption of approximately 20% of the First Trust ETF’s net assets in mid-September may have been related to the UAW strike, although it is difficult to say for certain.”
JPMorgan estimates that GM will face a hit to operating profit of $191 million, while Ford will face a hit of $145 million in the third quarter due to the strike.
On the other hand, the Global X Autonomous & Electric Vehicles ETF, which has a larger portfolio value of $719.63 million and where the three affected carmakers represent only 5% of the portfolio, experienced net outflows of $12.3 million in September. This is an improvement from the previous month where the fund experienced outflows of $59.3 million.
The First Trust fund experienced a 4.4% decrease in value last month, while the Global X fund saw a decrease of 5.7%.
Todd Sohn, ETF and technical strategist at Strategas Securities, commented, “EV-focused funds remain quite depressed, although this has been the case for some time. Rate pressure is definitely an agitation, and the recent strike just adds to the heap.”
Despite hopes that the UAW strikes would assist Tesla in expanding its market share, funds tracking the company failed to attract inflows last month. The Direxion Daily TSLA Bull 1.5X Shares ETF, with a value of $1.02 billion, experienced net outflows for the first time in four months.
Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva
Credit: The Star : Tech Feed
