Emerging-market equity fund flows and investor positioning: Taiwan attracted strong weekly foreign inflows while hedge funds reduced Asian exposure, led by Korea AI positions

Overview

This weekly monitor reviews foreign, domestic, hedge-fund and mutual-fund equity flows across emerging markets. Its central message is a divergence between strong weekly Taiwan foreign inflows and Southbound buying, versus hedge-fund selling of Asia—particularly Korean AI exposure—while longer-horizon mutual-fund positioning remains underweight Taiwan and Korea.

Core views

Foreign investor flows were mixed across emerging markets. EM Asia ex-China recorded US$1.4bn of net foreign buying week over week in a shortened trading week, entirely driven by Taiwan's US$1.7bn inflow. Non-Asia EMs received US$170mn, led by Brazil at US$80mn. This weekly improvement sits against substantial 2026 cumulative foreign selling: EM Asia ex-China had US$187.9bn of outflows year to date, including Korea at US$120.2bn and Taiwan at US$37.7bn. By contrast, non-Asia EM markets had US$7.4bn of 2026 inflows, led by Brazil at US$5.1bn and Poland at US$1.5bn. Hong Kong Southbound flows remained strong, with US$2.9bn of weekly net buying and US$56bn year to date. The largest weekly purchases were the Tracker Fund of Hong Kong (US$498mn), Tencent (US$216mn), Alibaba Group (US$158mn), Zhipu (US$119mn) and Yangtze Optical Fibre & Cable (US$78mn). The largest weekly sales were Kingboard Laminates (US$206mn), SMIC (US$146mn) and China Gold International Resources (US$67mn). Goldman Sachs notes that Southbound flows represent Mainland investors purchasing Hong Kong-listed shares and are therefore more domestic than foreign institutional flows. Hedge-fund positioning through September 24 showed Asian equities being net sold month to date, with Korea leading both selling and de-grossing as funds unwound AI-related longs. Buying in Hong Kong and Australia partly offset the regional sales. Aggregate Asia net allocation rose 69bp to 30.5%, still 13.2% overweight versus MSCI World but below a roughly 20% peak around mid-June. China exposure remained range-bound: gross allocation was 7.1%, at the 84th percentile of its five-year range, while net allocation was 7.5%, at the 27th percentile. Korea's net allocation fell to 4.8%, at the 61st percentile over one year, although gross allocation stayed at 3.1%. Taiwan diverged from Korea as net allocation increased to 6.8%, at the 79th one-year and 96th five-year percentiles; gross allocation reached 4.3%. Mutual-fund data based on final end-August EPFR holdings show a different, benchmark-relative positioning picture. Asian active funds were most overweight China, Singapore and Hong Kong, but most underweight Taiwan and India; Taiwan was 510bp underweight and India 220bp underweight. Nevertheless, these Asian funds increased Taiwan exposure by 50bp and India exposure by 20bp over the month. EM active funds were most overweight Brazil and Mexico and most underweight Taiwan and Korea, with Taiwan 420bp underweight and Korea 190bp underweight. Over the past month, EM funds raised relative exposure most to India and Taiwan and reduced China exposure. Sectorally, funds were most overweight China Industrials and most underweight Taiwan technology hardware and semiconductors and China banks. The report also highlights the 50 stocks most widely held by the largest 200 EM funds, ranked by number of fund holders. The screen combines ownership breadth with market capitalization, liquidity, benchmark-relative fund positioning, valuation and consensus earnings-growth information. TSMC, Samsung Electronics, Tencent, SK Hynix, Alibaba Group and MediaTek are among the most widely held names, illustrating the concentration of major EM fund ownership in Taiwan and Korea technology, China internet and large financials.

Analysis framework

Goldman Sachs combines weekly foreign-investor, domestic-investor and Stock Connect flow data with hedge-fund Prime Services positioning and final EPFR mutual-fund holdings. It compares allocations with benchmarks and historical percentiles, separates active and passive fund flows where available, and uses a holdings screen of the largest 200 EM funds to identify widely owned stocks.

Methodology notes

• Other

  Fund-flow and benchmark-relative positioning analysis

  The report tracks investor purchases, sales and portfolio weights across foreign investors, hedge funds and active mutual funds, then compares allocations with benchmarks and historical ranges to identify positioning changes.

Key data

• EM Asia ex-China weekly foreign flowUS$1.4bnWeek-over-week inflow, driven by Taiwan's US$1.7bn inflow.
• Southbound weekly and year-to-date flowUS$2.9bn; US$56bn YTDWeekly Mainland buying of Hong Kong-listed shares and cumulative 2026 flow.
• Global equity-fund flow-US$10.2bnWeekly outflow versus US$7.3bn inflow in the prior week.
• Asia hedge-fund net allocation30.5%Up 69bp; 13.2% overweight versus MSCI World.
• Korea and Taiwan hedge-fund net allocations4.8%; 6.8%Korea declined while Taiwan increased month to date through September 24.
• EM fund Taiwan allocation-420bpMost underweight EM market in the active-fund sample at end-August.
• 2026 foreign flow into Korea-US$120.2bnLargest foreign selling among the listed EM markets.

Impact & implications

The report highlights a near-term contrast: Taiwan attracted weekly foreign buying and increasing hedge-fund allocation, while Korea faced hedge-fund de-risking linked to AI exposure. Mutual funds added Taiwan and India at the margin but remained materially underweight Taiwan and Korea, leaving positioning signals mixed across investor types.

Risks

• Hedge-fund selling and de-grossing in Korea were linked to the continued unwinding of AI exposures.
• Leveraged ETF daily rebalancing flows may amplify intraday volatility, particularly in Korea.
• Margin balances in North Asia have reached record absolute levels, although the report says structural regulatory and margin limits constrain further leverage expansion.

What to watch

• Whether Taiwan's weekly foreign inflows persist after the shortened trading week.
• Further hedge-fund unwinding of Korean AI exposure and the relative allocation gap between Korea and Taiwan.
• Changes in active mutual-fund underweights in Taiwan and Korea, and recent additions to India and Taiwan.
• The continuation of Southbound Connect inflows and the concentration of buying and selling in Hong Kong stocks.