Markets live, Wednesday, March 23, 2022

VanEck removed Zip Co, Magellan Financial, Eagers Automotive, Reliance Worldwide and Downer EDI from its equally weighted Australian ETF due to falling stock prices and rising bond yields.

The fund exited all five companies on March 18, leaving 89 companies in the ETF, to avoid exposure to pockets of the market that will be hurt by rising interest rates.

“A notable deleter was Zip, whose share price has fallen this year, belonging to the unprofitable buy now, pay later (BNPL) sector, which has been hammered by higher bond yields,” said the Head of Investments and Capital Markets at VanEck. , said Russel Chesler today.

As bond yields rise, they reduce the appeal of investing in risky stocks. Credit:PA

Zip Co is down 62.4% year-to-date at $1.63 today. Magellan Financial Group fell 30.7% to $14.72, Downer EDI was down 11.2% and Reliance Worldwide was down 32%. However, Eagers Automotive is up 1.3% year-to-date.

Yields on Australian 10-year government bonds hit 2.77% today, the highest level since October 2018, he added.

“Current momentum is strong and we expect the 10-year bond yield to climb more than 3% in the near term.”

“The speculative tech companies that investors have favored in recent years have fallen significantly and will remain under pressure as yields rise. With inflation persisting, we favor companies with strong fundamentals.

VanEck owned as many as 3.4 million shares of Zip at the end of 2021, which puts him in the top 20 shareholders. Its stake in Magellan Financial has fallen from 790,277 shares at the end of last year to just under 200,000 currently.

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