EM Fund inflows surge to 28-month high; India sees strong ETF demand but long-only flows stay muted

These flows translated into strong country-level buying, led by Taiwan ($735 million, the largest since January 2023), India ($678 million), South Korea ($686 million), and Brazil ($479 million). China and Hong Kong also saw sizable inflows of $893 million and $566 million respectively.

Emerging market (EM) funds witnessed their strongest weekly inflows in 28 months, as global investors pumped $2.4 billion into EM equities, largely through exchange-traded funds (ETFs), according to Elara Capital's Global Liquidity tracker. According to the report, a similar pattern was seen in early 2023, when heavy ETF allocations followed sharp corrections in EM indices.

According to the data tracked over the past week, $1.4 billion flowed into the iShares Core MSCI EM ETF, with another $676 million into the Vanguard FTSE EM ETF. These flows translated into strong country-level buying, led by Taiwan ($735 million, the largest since January 2023), India ($678 million), South Korea ($686 million), and Brazil ($479 million). China and Hong Kong also saw sizable inflows of $893 million and $566 million respectively.

For India, the report noted that the week marked a seven-week high inflow of $685 million, slightly lower than the $726 million recorded in the week ended April 30. Of this, $510 million came from global allocation funds and $175 million from India-dedicated strategies. Nearly 80% of the inflows were concentrated in the iShares MSCI India ETF, underscoring the dominance of passive vehicles in recent India allocations.

The report added that since March 2025, the largest inflows into India from U.S. investors have come via the Franklin FTSE India ETF, followed closely by iShares MSCI India ETF. However, long-only active flows remain muted, even as ETFs have driven most of the momentum since the current leg of inflows began in April.

On the other hand, US domestic fund flows rebounded, registering $37 billion in inflows, with 95% of that coming from Vanguard ETFs. The biggest contributors were Vanguard S&P 500 ETF ($15 billion), Midcap ETF ($4.8 billion), and Total Market ETF ($4 billion). The spike peaked on June 12, the day of the largest single-day inflow, but US markets have stalled since, the report noted adding that a similar scenario unfolded in February 2025, where strong inflows failed to drive markets higher and were followed by a notable correction. The report added that foreign inflows into US markets also slowed, falling to just $380 million. This is below the $3.4 billion weekly average.

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