Weekly ETF Inflows Eke Out Gains

Inflows into U.S.-based ETFs slowed by a little more than three-quarters week over week, led primarily by a major slowdown in U.S. equities.

Data from ETF.com provider FactSet showed the U.S. ETF industry saw inflows of $5.54 billion between July 30 and August 5, compared to approximately $23.5 billion in the preceding period. Net inflows have reached $525.9 billion year-to-date.

XLF, Junk Bonds Drop

Inflows fell across most of the asset classes between this week and last, but no drop was more pronounced than in U.S. equities. The class that has mainly driven this year’s record-breaking bull run into ETFs dropped from roughly $10.5 billion in inflows last week to just $622 million this week.

The SPDR S&P 500 ETF Trust (SPY) led outflows with $1.7 billion in the period during a week where the S&P 500 slipped early in the week before recovering to almost flat as of the close on Thursday.

Investors also exited positions on the Financial Select Sector SPDR Fund (XLF) to the tune of $1.3 billion, and took out a combined $1.8 billion from the corporate junk bond funds SPDR S&P Dividend ETF (SDY) and iShares iBoxx USD High-Yield Corporate Bond ETF (HYG).

It’s difficult to pin the movements of fund flows to one single event, especially as XLF’s average daily volume makes it useful as a short-term tactical play. However, it’s likely that the flattening yield curve spooked some investors out of those ETFs.

Bonds Lead Inflows

While the U.S. fixed income sector slowed by approximately $2.3 billion week-over-week, bond ETFs were the most prevalent in inflows during the week.

The Vanguard Short-Term Bond ETF (BSV) was tops, pulling in just under $1.3 billion, while the iShares 7-10 Year Treasury Bond ETF (IEF) followed, with nearly $1.2 billion in inflows. The iShares TIPS Bond ETF (TIP) and iShares 20+ Year Treasury Bond ETF (VTI) also appeared in the week’s top 10 funds with a combined $1.5 billion.

KWEB: A YOLO Trade?

Finally, the KraneShares CSI China Internet ETF (KWEB) appeared on the top 10 inflows list with roughly $5.7 billion coming into the fund.

Financial news-watchers may be scratching their heads at those flows, considering the fund has posted losses of 26% in the past 30 days after a string of tech crackdowns from Beijing.

In the past several weeks, Chinese officials have levied a $3 billion fine against e-commerce juggernaut Alibaba Group, ordered security reviews on ridesharing app developer Didi after its U.S. listing, and raised broader questions about the government’s involvement in the private sector there.

It appears retail traders drove a “buy the dip” strategy in late June, with volumes peaking above 20 million shares daily before coming down to around 5 million or so per day this week.