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Analyse: Lyxor ETF STOXX Europe 600 Telecommunication

Dieser Sektor-ETF gewichtet vor allem britische Aktien. Top-5-Werte machen 70% des Fondsvermögens aus.

Lee Davidson 02.03.2012

Rolle im Portfolio

The Lyxor ETF STOXX Europe 600 Telecommunication provides equity exposure to European domiciled telecommunication firms. Currently, the telecomm industry accounts for 3% of global GDP and figures to be an important contributor to global GDP growth. While the European telecomm market is relatively mature, growth opportunities exist for firms within developing markets. The International Telecommunications Union (ITU) reports that the percentage of households with internet access has increased from 20% to 33% globally since 2006. In the developed world, 75% of households tend to have internet access compared to only 25% of developing world households. Keep in mind, that while the developing world as a whole has yet to become saturated with internet connectivity, the absolute number of users in some developing nations is massive. China, for instance, accounts for 25% of the world's internet users and 37% of all developing countries' users. Despite a considerable absolute number of Chinese users, per capita internet usage in China is still only around 31%. In addition to variances in usage based on geography, internet usage is largely divided along demographic lines. Today, internet users tend to be disproportionately younger with 45% of all internet users under the age of 25. Over time, total internet usage should continue to increase as today's young users will not likely reduce or eliminate their internet usage en masse.

Over the past ten years, the fund’s reference index has exhibited moderate correlations of 0.74 and 0.83 to the MSCI World and STOXX Europe 600 indices, respectively. Lately, yield-seeking investors have been flocking to the telecomm sector to take advantage of attractive dividend yields. At the time of this writing, this ETF's dividend yield is 5.2% compared to 2% for the MSCI World index. Given its narrow sector focus, this ETF is most suitable for use as a tactical tool.

Fundamentale Analyse

Investors have historically held telecom stocks with defensive motivations centered on hopes for downside protection. Over the past three years, the reference index has lived up to these expectations by offering substantial downside protection relative to the MSCI World index as measured by its downside capture ratio of 80.35 compared to 141.96 for the STOXX Europe 600. These downside capture measurements indicate that for a 10% loss in the MSCI World index, the reference index will only lose 8% of its value, compared to the STOXX Europe 600 which would lose more than 14%. Despite a successful track record so far, industry analysts are concerned these defensive characteristics may not persist over the long-term. Telecomm firms are increasingly shifting their business models toward consumer-dependent wireless services and away from more stable, traditional fixed-line business. According to the ITU, mobile broadband subscriptions have grown at an explosive rate of 45% annually since 2007 and, today, outnumber fixed broadband subscriptions two-to-one. As the fixed-line business declines, firms lose some of their protection against economic downturns. Wireless service revenue has been shown to be more sensitive to macroeconomic trends and shifts in demand because consumers pay per use and not a fixed rate.

Another trend across Europe is the proliferation of smartphones and mobile data packages. Nomura analysts estimate that smartphone usage as a percentage of overall usage has grown from 16% in 2010 to 25% in 2011 and is expected to reach 35% by the end of 2012. However, this growth in smartphone technology has not added much value to telecomm firms. Historically, telecomm firms reaped significant revenues from usage-based plans (i.e. charging per text, call, etc). However, since smartphones have the ability to utilise "apps" to perform voice, text, and roaming services, smartphone users are more inclined to choose flat-rate data packages versus usage-based plans. As a result, the adoption of smartphones has cannibalised usage-based plan revenues.

As it represents nearly a third of the overall index value, Vodaphone's performance will be instrumental in determining the price trajectory of this ETF.  As the second largest wireless service provider in the world behind China Mobile, Vodaphone's scale and scope has provided the firm with cost advantages enabling programs developed in one market to be rolled out into other markets with ease and at little extra cost. Vodaphone is intimately tied to the European markets, where 70% of its revenue is generated. However, given the maturity of the European market, revenue growth in Europe has mainly been a function of currency movements rather than true growth. In recent years, Vodaphone has successfully penetrated cellular markets in Africa, the Middle East, and Asia Pacific realising 8.6% growth in local currency terms through the third quarter 2011, though currency headwinds pulled this growth down to -0.6% in GBP terms. Over the short-term, subscriber growth should rise most rapidly from Vodaphone's operations in India and Turkey where the firm has demonstrated success stealing market share away from incumbent wireless providers. 

Indexkonstruktion

The STOXX Europe 600 Telecommunication Index is a total return index and a subset of the broader STOXX Europe 600 index, which covers about 90% of the aggregate market capitalisation of the eligible countries. The components are selected from publicly-traded companies headquartered in the 18 eligible countries within Europe. The index is free-float adjusted and market capitalisation weighted. Because closely held firms will have a smaller piece of their aggregate market capitalisation floated on public exchanges, the free-float adjustment serves to ensure the underlying liquidity of the holdings is superior relative to a pure market capitalisation weighting. As of this writing the index has 21 components. The index is biased towards the UK (40% of the index’s value), followed by Spain (14%) and Germany (10%). Moreover, the index is very top-heavy with the top five constituents accounting for more than 70% of its total value. Vodafone alone represents 30% of the index’s value, followed by Telefonica (14%) and Deutsche Telekom (10%).

Fondskonstruktion

The Lyxor ETF STOXX Europe 600 Telecommunication Index uses synthetic replication method to track the STOXX Europe 600 Telecommunication Index. To achieve this performance, the fund buys a basket of securities and enters an un-funded swap with parent company Societe Generale. Under this agreement, the bank gives away the performance of the index in exchange for the performance of the fund’s holdings. In line with UCITS requirements, counterparty risk exposure mustn’t exceed 10% of the fund’s net asset value (NAV). This means that the ETF's holdings must represent at least 90% of the fund’s net asset value at the end of any given day. As of writing, the majority of the ETF's holdings are comprised of European blue chip equities. In addition, the ETF holds a fund (representing about 7% of its NAV) that invests in a repo fully collateralised with UK equities. The repo agreement helps to partially offset the value of the swap, thus reducing counterparty exposure. Lyxor’s risk department monitors the fund’s holdings and swap exposure on a daily basis. No securities lending is implemented within this fund, which limits counterparty risk at the fund level. Dividends are accumulated throughout the year and held in a ‘cash bucket’ until they are distributed to fund holders once a year. This dividend treatment can potentially create a drag on return in upward trending markets because dividends are not reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls. The fund’s cash bucket is currently earning the EONIA rate.

Gebühren

The fund levies a total expense ratio (TER) of 0.30%. This lies in the middle of the range of ETFs tracking the European telecommunications sector.

Alternativen

As of writing, there are a few ETFs tracking the European telecommunications sector. The largest alternative in terms of total assets under management is the Source STOXX Europe 600 Optimised Telecommunication ETF. Source uses synthetic replication and levies a TER of 0.30%. Given the lower cap applied by this optimised index version on individual stocks, this ETF is less biased towards the UK (28% of the index’s value versus 40%) and Vodafone (20% versus 30%).

Investors preferring physical replication can make use of the iShares STOXX Europe 600 Telecommunication which levies a TER of 0.52%.

For a broader global exposure, investors may consider the Lyxor ETF MSCI World Telecommunication Services. The ETF is biased towards the US, representing 37% of the index’s value followed by the UK (17%) and Japan (10%) to round out this index’s top three country exposures. AT&T is the largest single index constituent, representing 18% of the index’s value. This ETF uses synthetic replication and levies a TER of 0.40%.

Über den Autor

Lee Davidson  is an ETF analyst with Morningstar Europe.