Inflows into US portfolio assets slowed, but overall remained resilient

Overview

This report is Nomura's Asia FX Strategy high-frequency investor flow update, focusing on foreign inflows into US equity and bond funds, emerging market ETFs, Korean retail buying of US assets, and changes in Taiwan investors' trading of USD bond ETFs. The overall conclusion is that inflows cooled from the previous week, but US portfolio assets and risk-asset-related funds still maintained net inflows, indicating that cross-border allocation demand remains resilient.

Core views

The core views include: first, total inflows into US-focused funds fell from USD2.464bn in the previous week to USD1.566bn, but remained positive; second, the inflow mix was clearly skewed toward equities, with US-focused equity funds posting USD1.460bn in the latest week versus only USD106mn for bond funds; third, inflows into emerging market ETFs also slowed, but cumulative month-to-date July inflows remained stronger than in June; fourth, Korean retail investors continued to net buy US equities and bonds, though at a much weaker pace than the previous week; fifth, Taiwan USD bond ETFs remained in net outflow, but the magnitude of outflows narrowed.

Analysis framework

The report adopts a weekly and monthly flow comparison framework, presenting the latest five trading days, the previous five trading days, month-to-date July, and earlier monthly flow data side by side to assess allocation direction, changes in risk appetite, and the strength of cross-border asset demand. The focus is not on making a single-asset price forecast, but on using fund and retail trading flows to monitor US-dollar assets, emerging market assets, and the behavior of Asian investors.

Methodology notes

• Fund flow trackingWeekly high-frequency investor flow update

  Compare net inflows or outflows across different asset classes and investor groups between the latest five trading days and the previous five trading days.

  This method uses the strength and direction of fund flows to measure changes in investor allocation behavior. It is suitable for observing short-term risk appetite and cross-border asset demand, but cannot by itself be equated with a price forecast.

• Proxy definitionProxy indicator for foreign inflows into US-focused equity funds

  Uses funds listed or registered in non-US markets that primarily invest in US equities as a proxy for foreign inflows into US equity assets.

  The report assumes these funds are mainly held by non-US retail and institutional investors, so changes in subscriptions and redemptions can be used to approximately track foreign inflows into US equity funds.

• Proxy definitionProxy indicator for foreign inflows into US-focused bond funds

  Uses funds listed in non-US markets that primarily invest in US bonds as a proxy for foreign inflows into US bond assets.

  This definition is used to estimate non-US investors' allocation demand for US bond funds, and the report shows that inflows into bond funds were small in the latest week.

• Proxy definitionProxy indicator for foreign inflows into emerging market ETFs

  Uses ETFs listed outside emerging markets that primarily invest in emerging markets as a proxy for foreign inflows into emerging market funds.

  This definition is used to observe global investors' allocation to emerging market risk assets. Inflows slowed in the latest week but remained meaningfully positive month-to-date in July.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• US-focused equity ETFs and mutual funds

  The main destination for foreign inflows into US assets

  Strengths

  The latest week still recorded USD1.460bn of net inflows, and month-to-date July totaled USD9.069bn, showing that allocation demand remains strong.

  Weaknesses

  This slowed significantly from USD2.264bn in the previous week, and month-to-date July is below June's USD13.530bn.

  Comparison

  Compared with US-focused bond funds, equity funds accounted for the vast majority of net inflows into US-focused funds.

  Risks

  If risk appetite declines or US equity market volatility rises, inflows could continue to slow or even turn into outflows.

• US-focused bond ETFs and mutual funds

  An indicator for foreign inflows into US fixed income assets

  Strengths

  The latest week still maintained a small net inflow of USD106mn, and month-to-date July slightly offset June's outflows.

  Weaknesses

  The scale of inflows is small, and even the previous week saw only USD200mn, indicating weak demand for bond funds.

  Comparison

  Compared with equity funds, bond funds made only a limited contribution to total inflows.

  Risks

  Rate volatility, USD moves, and changes in yield expectations may continue to weigh on bond fund allocations.

• Emerging market-focused ETFs

  A proxy for global investor risk appetite and demand for emerging market allocations

  Strengths

  The latest week posted net inflows of USD2.207bn, and month-to-date July reached USD6.000bn, above June's USD3.077bn.

  Weaknesses

  The latest week slowed from USD2.985bn in the previous week, while the bond subcategory saw only USD16mn of inflows.

  Comparison

  Month-to-date July inflows into emerging market ETFs were stronger than in June, showing meaningful marginal improvement.

  Risks

  If the USD strengthens, global risk appetite declines, or emerging market fundamentals come under pressure, the inflow trend may become volatile.

• Korean retail US portfolio assets

  A high-frequency window into Asian retail investor allocation to US assets

  Strengths

  The latest week still saw net buying of USD687mn, with US equities accounting for the main share at USD648mn.

  Weaknesses

  This was markedly down from USD1.932bn in the previous week, while bond buying was only USD39mn.

  Comparison

  Month-to-date July net buying reached USD2.847bn, significantly above June's USD466mn.

  Risks

  Retail flows may be more sensitive to US equity volatility, FX changes, and short-term sentiment.

• Taiwan locally listed USD bond ETFs

  An indicator of Taiwan investors' willingness to allocate to USD bonds

  Strengths

  Outflows were USD289mn in the latest week, narrowing from USD382mn in the previous week.

  Weaknesses

  They remain in net selling territory, with cumulative month-to-date July outflows of USD1.133bn and June outflows of USD2.077bn.

  Comparison

  In contrast to Korean retail buying of US assets, Taiwan USD bond ETFs continue to show a reduction trend.

  Risks

  If USD interest rates, credit spreads, or FX expectations turn unfavorable, outflows may persist.

Key data

• Total foreign inflows into US-focused fundsUSD1.566bnLatest week from July 17 to 23; previous week was USD2.464bn.
• Inflows into US-focused equity ETFs and mutual fundsUSD1.460bnFrom July 17 to 23; previous week was USD2.264bn; month-to-date July was USD9.069bn, and June was USD13.530bn.
• Inflows into US-focused bond ETFs and mutual fundsUSD106mnFrom July 17 to 23; previous week was USD200mn; month-to-date July was USD219mn, while June saw outflows of USD2.662bn.
• Total inflows into emerging market-focused ETFsUSD2.207bnFrom July 17 to 23; previous week was USD2.985bn; month-to-date July was USD6.000bn, and June was USD3.077bn.
• Inflows into emerging market equity fundsUSD2.191bnFrom July 17 to 23; month-to-date July was USD5.436bn.
• Inflows into emerging market bond fundsUSD16mnFrom July 17 to 23; month-to-date July was USD564mn.
• Korean retail net buying of US portfolio assetsUSD687mnFrom July 18 to 24; including USD648mn of US equities and USD39mn of US bonds; previous week total was USD1.932bn.
• Taiwan USD bond ETF fund flows-USD289mnFrom July 17 to 23; previous week was -USD382mn; month-to-date July was -USD1.133bn.

Impact & implications

For macro and FX strategy, the slowdown in fund flows indicates that the strong allocation momentum seen earlier has cooled at the margin, but continued net inflows imply that demand for US equities and some risk assets has not yet reversed. Weak inflows into US bond funds and continued outflows from Taiwan USD bond ETFs suggest that cross-border fixed income demand remains uneven; continued Korean retail buying of US equities also shows that Asian individual investors still favor US risk assets.

Risks

• The report uses fund listing or registration location as a proxy for foreign flows, which may not fully reflect end-investor nationality and the true source of funds.
• Fund flow data are based on high-frequency short-window observations, and weekly changes may be affected by holidays, market volatility, and subscription-redemption timing.
• This report does not provide price targets or explicit trading recommendations, and fund flow direction cannot be directly equated with future returns.
• Fund flows across US equities, US bonds, emerging market ETFs, and local Asian ETFs may all be jointly driven by FX, rates, and risk appetite, so single-factor attribution should be avoided when interpreting them.

What to watch

• Whether subsequent weekly inflows into US-focused equity funds continue cooling from July highs.
• Whether US-focused bond funds can expand from small inflows into more stable positive inflows.
• After strong month-to-date July inflows, whether emerging market ETFs can maintain a cumulative pace above June.
• Whether Korean retail buying of US equities recovers, or continues to slow versus the previous week.
• Whether outflows from Taiwan USD bond ETFs continue to narrow, or widen again.
• The impact of USD moves, US rate expectations, and global risk appetite on cross-border fund flows.