Japan Leads as Tech ETFs Bleed Cash

Japan is the hottest geography trade right now. ETFs focused on Japanese equities pulled in $14.0B net over the past week. Flow imbalance hit 79.1 out of 100 — strong buying pressure by any measure. Over three months, Japan has absorbed $144.1B in net inflows. That 3m figure ranks second only to the US, and on a week-over-week basis Japan is now the single biggest draw for fresh capital.

China tells the opposite story. Net outflows hit $6.6B in the past week. Flow imbalance dropped to just 33.8, signalling heavy selling pressure. That is a sharp contrast to the 3m picture, where China posted an $18.5B net inflow. Investors who were buying China through May and June appear to be reversing fast.

Geography Flows

The US still dominates by absolute size. American equity ETFs added $6.3B net this week against a backdrop of $97.5B gross inflows and $91.2B gross outflows. The 3m cumulative figure stands at $346.2B net. Emerging Markets attracted $2.4B this week with an imbalance of 82.5 — one of the highest readings across all geographies. Developed Europe added $1.1B on the week. Notably, Hong Kong shed $885M in the latest week and $9.8B over three months. Germany is losing money on both timeframes.

Sector Rotation

Technology is the week's biggest loser by a wide margin. IT sector ETFs bled $5.8B net in seven days. Gross outflows reached $14.6B, dwarfing inflows of $8.8B. Flow imbalance fell to just 37.5. That is a stark reversal — over three months, Tech was the top sector with $73.6B in net inflows.

Money is rotating into defensive and cyclical areas simultaneously. Industrials gained $1.3B this week. Healthcare collected $823M. Consumer Discretionary added $888M. Materials brought in $587M. Energy shed $321M on the week and a far steeper $7.4B over three months, making it the worst-performing sector on both timeframes.

Asset Class and Strategy

Both equities and bonds attracted capital this week. Equity ETFs led with $28.6B net. Fixed Income added $18.9B — a strong week with an imbalance of 69.8. Commodities picked up $2.5B, reversing a $30.2B three-month outflow. That three-month figure stands out. It suggests commodities had been under sustained selling pressure all summer.

Active strategies drew $7.2B this week. Over three months, active ETFs have gathered $221.4B — a flow imbalance of 76.3 versus Vanilla's 57.1. The gap between active and passive is widening. Dividend strategies lost $1.1B this week, yet remain in positive territory over three months at $16.2B. Growth ETFs bled $1.5B this week after $10.3B of three-month inflows. That reversal aligns with the broader rotation out of high-multiple tech names.

The overall tone this week is a risk rotation, not a risk-off retreat. Investors are selling expensive tech and growth, moving into bonds, Japan, and defensive sectors — while keeping total equity exposure broadly intact.