Asia Stampede Leads a Broad Risk-On Week

China and Japan led a surge of equity inflows this week, pulling money away from tech and into Asia. The pattern marks a clear shift from the three-month trend, where Japanese funds bled cash and financials were the biggest sector drag.

Geography Flows: Asia Dominates

China attracted $13.8B in net ETF inflows over the past week. That puts it second only to the US, which pulled in $15.4B. Japan added $4.8B and Taiwan $4.5B.

The Japan number is the sharpest reversal in the data. Over three months, Japan ETFs bled $16.2B in net outflows, the worst of any geography tracked. This week, the same funds posted a flow imbalance of 87, indicating strong one-sided buying. Japan numerically controlled machine tool orders rose 59% year-on-year in September, with the order backlog up 50%, according to ORTEX alt data. That kind of real-economy momentum gives buyers a data point to lean on.

Hong Kong was a notable exception. It was an outflow last week at -$394M, despite posting a solid $8.8B net gain over three months. The MTR passenger data for August showed the biggest August total in seven years at 162.7 million journeys, but ETF buyers were not chasing it this week.

South Korea also saw outflows of $1.4B over the week, with a flow imbalance of just 32, indicating selling pressure. Brazil shed $954M. Both countries sit in outflow over the week despite positive three-month totals.

India had a small weekly outflow of $32M. Over three months India lost $799M in net flows, one of the few EM geographies showing consistent pressure on both timeframes.

Sector Rotation: Tech Stumbles, Defensives Gain

Information Technology was the only sector with heavy outflows this week, losing $1.7B in net flows. The gross numbers are stark: $7.6B came in, but $9.2B left. Over three months, tech was a net receiver of $5.3B, so this week breaks the medium-term trend.

Financials and Health Care filled the gap. Financials took in $1.4B in net flows this week, with a flow imbalance of 67. Health Care added $1.2B at an imbalance of 68. Both are defensive positioning signals at the sector level.

Over three months, the picture is flipped. Financials bled $8.8B in net outflows over 90 days, the worst of any sector. Health Care was a consistent gainer at $3.8B. The weekly financial inflow is therefore a potential reversal worth watching, not a continuation.

Communication Services, Consumer Staples, and Energy all posted modest positive weekly flows. Materials, Real Estate, and Utilities saw small outflows.

Asset Class and Strategy: Equities and Bonds Both in Demand

Equities pulled in $40B in net flows this week. Fixed income added $1.7B. Commodities gained $779M. Currency ETFs saw $483M of net outflows.

Over three months, the picture is more balanced. Fixed income attracted $286B, nearly matching equity's $518B. Commodities added $33.7B. That broad multi-asset demand points to a risk environment where investors are not purely rotating into one class.

On strategy, Vanilla passive funds led at $19.9B for the week. The most notable shift is Active strategies, which pulled in $2.8B this week but $157.9B over three months. Active outpaced Vanilla relative to its size over 90 days, a signal that selectivity has been rewarded.

Growth strategies took $2.3B in weekly flows. Dividends added $1.7B. Momentum strategies had a small positive week at $134M but have shed $3.9B over three months, the clearest strategy-level reversal in the dataset.

The week's overall tone is risk-on with geographic diversification. Cash is moving into Asian equities, defensives are gaining ground within the US, and the bond bid remains steady underneath.