BlackRock Says ETF Demand Will Soften with Euro Crisis

BlackRock Inc. (NYSE:BLK) reduced its outlook for the exchange-traded funds market for 2011 by about half due to volatile equity markets that have been overwhelmed by the Eurozone contagion. ^[1] The market is now projected to grow at 10 – 15% in the current year, compared to previous estimates of 20 – 30% asset growth. BlackRock is one of the leading players in the ETF market along with State Street (NYSE:STT) and Charles Schwab (NYSE:SCHW).

We have revised our price estimate for BlackRock to $191, to reflect Q3 earnings and the present global economic conditions. Our new price estimate is nearly 20% above the current market price.

See our complete analysis of BlackRock stock here

The company is calling for stronger measures by European Union policymakers to help contain the region’s widening debt crisis. The proposed course of action involves mandatory 75 – 80% debt writedowns for private lenders, debt restructuring and increased bond purchases by the European Central Bank. ^{[2] [3]}

According to Bloomberg, eight major money market funds in the U.S., including BlackRock and Fidelity Investments, reduced their investments in Deutsche Bank by $8.1 billion in October. ^[4] This highlights the flight of fund managers to minimize their exposures to the ailing European economy. It is interesting to note that BlackRock remains comfortable with its position in Italian bonds, which it increased in October, despite recent losses. You can read about this in our article BlackRock Gets Thumped by Italy, Stock Cautiously Recovers.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. BlackRock cuts ETF market outlook for 2011, Financial Post [↩]
2. BlackRock says steeper European writedowns needed, Reuters [↩]
3. More bond buying needed in Europe: BlackRock, Financial Post [↩]
4. U.S. Prime Money-Market Funds Pull $8 Billion From Deutsche Bank, Bloomberg [↩]