From South Korea to Semiconductors: Top ETF Inflows
The ETF market saw inflows shift notably this past week, as investors funneled capital toward international valuation gaps and domestic large-cap equities. This, coupled with aggressive buying in the semiconductor sector amid a market drawdown, highlights continued investor appetite for growth despite broader market fluctuations.
Key Takeaways
- Investors directed $3.03 billion into the iShares MSCI South Korea ETF (EWY) to bypass the high premiums associated with the recently listed U.S. ADRs while the issuance and cancellation books remain closed until July 29.
- Capital continued to flow into U.S. large-cap equity funds, with the State Street SPDR Portfolio S&P 500 ETF (SPYM) gaining $1.82 billion and the Invesco NASDAQ 100 ETF (QQQM) drawing $1.08 billion, while investors also allocated $1.47 billion to the iShares MSCI Value ETF (EFV) to hedge against U.S. tech-heavy market concentration.
- Despite a July pullback, capital flooded into the semiconductor sector. The iShares Semiconductor ETF (SOXX) gained $2.40 billion. Meanwhile, the Direxion Daily Semiconductor Bull 3X ETF (SOXL) recorded $1.38 billion in inflows. The Roundhill Memory ETF (DRAM) attracted $1.66 billion as investors continue to seek exposure to AI-driven memory shortages.
Bypassing the SK Hynix ADR Premium
The iShares MSCI South Korea ETF (EWY) led inflows last week, gaining $3.03 billion. This spike in inflows is primarily driven by investors using the fund as a proxy to gain exposure to SK Hynix (SKHY), as the newly launched American Depository Receipts (ADRs) have traded at a substantial premium compared to local shares on the Korea Exchange.
SK Hynix ADRs traded at a premium of approximately 27% as of last Thursday afternoon, following a record 51% premium the prior day, according to Bloomberg analysis. The price difference between South Korean shares and U.S. ADRs of SK Hynix remains constrained as the ADR books are closed for issuance and cancellation until July 29, following the official listing date of the newly issued common shares in the South Korean market.
Rather than paying the premium for U.S.-listed ADRs, investors are pouring capital into EWY, where SK Hynix is the top holding, representing 24.18% of the portfolio. The fund functions as a cheaper method of gaining exposure to the underlying Korean shares.
Large-Cap Momentum and International Value
While headlines focused on South Korean markets, investors continued to allocate capital into U.S. large-cap equity funds. The State Street SPDR Portfolio S&P 500 ETF (SPYM) saw inflows of $1.82 billion last week, while the more concentrated Invesco NASDAQ 100 ETF (QQQM) saw inflows of $1.08 billion over the same period.
For investors seeking exposure to international large- and mid-cap value stocks, the iShares MSCI EAFE Value ETF (EFV) saw inflows of $1.47 billion during the past week. Investors continue to pour capital into international value funds to seek cheaper valuations and hedge against mega-cap tech-dominated U.S. market concentration.
Capitalizing on the July Pullback
Despite the semiconductor market having seen a pullback in July, investors are aggressively buying into the dip, likely viewing it as a buying opportunity rather than a sign that the sector has reached its peak.
The iShares Semiconductor ETF (SOXX), which provides exposure to roughly 30 U.S.-listed semiconductor companies, saw inflows of $2.40 billion last week. Tracking the same index, the Direxion Daily Semiconductor Bull 3X ETF (SOXL) seeks to provide 300% of the daily performance of the underlying ICE Semiconductor Index. SOXL recorded inflows of $1.38 billion over the past week.
Looking specifically at the memory semiconductor market, the Roundhill Memory ETF (DRAM), which is down over 30% from its June highs, pulled in $1.66 billion during last week’s trading. Investors continue to commit capital to the memory component industry as AI-driven memory shortages persist.
Capitalizing on Financial Earnings and Recent ETF Debuts
The State Street Financial Select Sector SPDR ETF (XLF) attracted $962.88 million last week, driven by strong second-quarter earnings growth across top holdings such as JPMorgan (JPM) and cooling U.S. inflation data that has eased rate hike pressures.
Two recently launched ETFs also saw significant inflows over the past week. The SEI QiM U.S. Equity Factor Allocation Active ETF (SEUS), which launched on July 14, recorded inflows of $886.13 million. The fund targets U.S. equities using proprietary factor research and integrated risk models to adapt to evolving market conditions.
The Fidelity MSCI North American Subset Index ETF (FINA) launched on July 9 and attracted $853.50 million in assets last week, largely driven by institutional interest in climate-aligned core equity exposure. The fund targets large- and mid-cap U.S. and Canadian stocks that meet emissions reduction targets approved by the Science Based Targets initiative (SBTi).
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