China Surge Leads Risk-On Rotation

The biggest money flow story this week is China. ETFs focused on the country pulled in $26.6B in net new money over the past five days. That is the second-largest geographic inflow behind only the U.S. ($30.7B). The flow imbalance score for China ETFs stands at 79, well inside "strong buying" territory. Over the three-month horizon, China has also attracted $71.7B in net flows, second only to the U.S. ($311B). The trend has not reversed. It has intensified.

Geography: Asia Dominates Inflows

Taiwan added $5.4B in net flows this week, with a flow imbalance of 93. South Korea brought in $3.4B and Hong Kong $2.5B. The pattern is consistent over three months too, with Taiwan at $21.1B and Hong Kong at $12.2B. The notable reversal is Japan. Over three months, Japan suffered a $28.7B net outflow, the largest regional drain globally. This week it turned modestly positive at $900M, but buying pressure remains thin at a 64.5 imbalance score. Developed Europe added only $331M on the week, with a flow imbalance of just 61.8. That follows $6.4B over three months. India is a clear reversal story. It collected $168M this week but is nursing a $641M outflow over three months.

Sector Rotation: Tech Leads, Industrials Bleed

Technology absorbed $3.3B in net sector flows this week. That is the only sector with a positive net. Industrials shed $1.4B, the worst of any sector on the week. Financials lost $594M. Utilities dropped $318M. Over three months the picture shifts materially. Technology's three-month net is just $16B, while Health Care has collected $3.3B and Energy $3.1B. Industrials have been bleeding consistently. Their three-month outflow stands at $3.0B. The week's data confirms the rotation: money is leaving rate-sensitive and cyclical sectors and concentrating in large-cap Tech.

Asset Class and Strategy: Equities Win, Active Managers Gaining Ground

Equity ETFs took in $76.2B net this week. Fixed Income added $3.7B. Commodities and currencies both saw outflows, $445M and $1.5B respectively. Over three months the asset class split is more balanced. Fixed Income has pulled in $280.8B, nearly half of equity's $574.3B haul. That is a meaningful bond bid alongside equities, not a pure risk-on trade. On strategy, passive "vanilla" ETFs dominated at $60.4B this week. But active ETFs are quietly building share. Active strategies have gathered $157.2B over three months, a 70.0 flow imbalance, versus vanilla's 57.0. Dividend strategies reversed sharply. They lost $1.6B this week but are sitting on $9.1B of three-month inflows. Growth added $2.8B on the week and $21.7B over three months.

The overall tone is risk-on but selective. Investors are buying equities, particularly U.S. and Asian markets, while also maintaining a steady bid for fixed income, suggesting caution lurking beneath the surface of the headline numbers.