Despite recent weak price action, global ETF investors are aggressively buying the dip in semiconductor and South Korean markets at record scale and with extreme leverage, while the memory sector faces relentless selling pressure.

According to the latest fund flow report released by JPMorgan on October 19, global equity ETFs attracted $46.3 billion in a single week (the week ending October 16), with the 3x leveraged semiconductor ETF (SOXL) posting a record-high inflow of $7.2 billion, and South Korea ETFs seeing their strongest inflows since July this year. However, significant divergence emerged within the technology sector, as DRAM (memory) themed ETFs suffered outflows for an eighth consecutive week.

The report notes that the market is exhibiting classic "panic buying the dip" characteristics — retail and aggressive investors are using high-leverage tools to bet on an AI-related semiconductor rebound, while institutional CTA strategy funds are simultaneously reducing US equity exposure. The tug-of-war between these two forces deserves close attention. The divergence between memory and the broader South Korean market suggests that concerns over memory chip fundamentals have not dissipated.

Additionally, CTA (Commodity Trading Advisor) funds have begun cutting US equity exposure and shorting the Russell 2000 index, while the fixed income market is seeing a rotation from long-term Treasuries into municipal bonds.

Leveraged Funds Rush to Buy the Dip, Semiconductors and South Korea Become Magnet for Capital

Investor faith in AI and tech stocks remains steadfast, with record leverage tools being deployed.

Data shows that leveraged ETF products attracted a record $9.3 billion in single-week inflows. Among them, the semiconductor sector was the absolute dominant destination, with semiconductor ETFs pulling in approximately $7.6 billion in total. Notably, the 3x leveraged semiconductor ETF (SOXL) saw single-week inflows of $7.2 billion, setting an all-time high and tripling the previous weekly peak.

Meanwhile, the South Korean market also welcomed its strongest buying since July, with $1.3 billion in single-week inflows, roughly half of which flowed into the 3x leveraged South Korea ETF (KORU, approximately $600 million). Other leveraged products such as TQQQ (approximately $800 million in inflows) and the inverse leveraged SOXS (approximately $500 million in inflows) also drew significant capital attention.

Although the South Korean market (dominated by semiconductor and memory chip exports) received strong buying, capital flows within the tech sector showed dramatic divergence. Memory-themed ETFs (DRAM) suffered an eighth consecutive week of outflows, posting their largest single-week redemption to date ($900 million in outflows).

Analysts suggest this phenomenon indicates that while investors are willing to bet on a rebound through broad South Korea ETFs, the market remains clearly averse to the memory chip sub-sector represented by SK Hynix, Micron, and others.

Other US Sectors Sold Off, CTA Funds Cut US Equity Exposure

Stripping away the tech sector frenzy, capital flows into other US industries were broadly weak. The industrial sector took a heavy hit with $1.6 billion in outflows, while real estate, consumer discretionary, utilities, and materials sectors also faced selling pressure.

From a systematic flow perspective, CTA funds have likely already reduced US equity exposure, as the S&P 500 and Nasdaq 100 fell below their 50-day moving averages on Friday.

Moreover, CTA signals on the Russell 2000 index (RTY) have flipped to short. CFTC positioning data confirms this, with asset managers selling Russell 2000 and mid-cap (MID) futures, while leveraged funds increased short positions in 2-year and 10-year US Treasury notes.

Fixed Income Rotation Emerges, Emerging Markets and Gold Favored, Cryptocurrency Sold Off

On the fixed income side, the recent "buy the dip" momentum cooled somewhat, with $10 billion in single-week inflows. Investors rotated notably within bonds: funds sharply exited long-term Treasuries ($3.4 billion in outflows) and mortgage-backed securities ($800 million in outflows), while pouring into municipal bonds ($5.1 billion in inflows, marking a third consecutive week of strong buying).

In emerging markets, Brazil continued to attract strong inflows ($1.2 billion) ahead of the final round of election voting. In commodities, precious metals attracted $1.1 billion in inflows, led primarily by gold ETF GLD ($800 million in inflows). In the currency/multi-asset category, cryptocurrency ETFs experienced $700 million in outflows.