Industrial Funds Turn Negative for First Time as EM Flows Stabilize Amid Tech Rally

Industrial Funds Turn Negative for First Time as EM Flows Stabilize Amid Tech Rally​

Global market flows are undergoing a significant realignment, with industrial funds registering negative rolling four-week flows—the first instance since the commencement of the AI trade in May 2025. While this represents a clear break in momentum for the sector, investor sentiment is showing resilience in emerging markets (EM) as various fund categories stabilize following recent corrections.

Industrial and Equity Fund Flow Reversal​

Industrial funds have recorded negative rolling four-week flows, marking a critical shift after more than a year of sustained inflows. This reversal indicates that the broader industrial supply chain is facing increased scrutiny from global investors. Meanwhile, US equity funds continued to see significant outflows, with $6 billion being redeemed in the latest week, marking the third consecutive week of redemptions in five weeks.

Emerging Market and India Fund Stabilization​

The corrective period seen in emerging markets is beginning to stabilize investor interest. Global Emerging Market (GEM) funds attracted $1.9 billion in inflows during the most recent week, preceded by $1.8 billion inflow in the prior period. This has helped reverse 28% of the $13 billion that was redeemed over the preceding ten weeks.

India-focused fund flows are also demonstrating early signs of stabilization after sustained outflows. Redemptions were paused after a cumulative outflow of $8.6 billion since February, though net inflows in the most recent week remained modest at $17 million. The recovery was driven by India-focused ETFs, which attracted $118 million, offset partially by $101 million in redemptions from active long-only funds.

Global Technology Dominance and Sectoral Divergence​

Technology funds continue to attract the strongest inflows globally, reaffirming that investors are prioritizing direct beneficiaries of AI over the wider industrial supply chain. This strong focus highlights a clear sectoral divergence within the market landscape.

Domestic Support in Asian Markets​

While foreign fund flows experienced cooling in Taiwan and South Korea, domestic investors provided robust support during recent corrections. Taiwan’s domestic funds recorded their second-largest weekly inflow at $4.8 billion, with this level matching a previous record set after the June market correction. Similarly, South Korea saw a sharp pickup in domestic inflows during its recent three-week correction period.

Commodity and Consumption Sector Shifts​

In commodities, gold funds recorded their largest weekly inflow since mid-April, indicating strengthening interest in the precious metal sector. Silver fund flows have also stabilized after several months of considerable redemptions.

Consumption funds, which have faced consistent outflows since November 2025 due to the pivot towards AI investments, are showing signs of easing selling pressure. Although consumption funds still registered redemptions, Elara noted that the pace of these outflows has slowed in recent weeks.