"Thought it was a stock that never goes up, but a 'reversal'"…Biggest wall of cash in 17 years [Maeng Jin-gyu’s Global Money Flow]

Korea Economic Daily

Summary

It said large-scale net inflows are heading into traditional-sector ETFs such as energy and industrials, which had been overlooked during the AI rally.
It reported that returns and inflows are standing out for traditional-sector, dividend and financial ETFs including XLE, XLI, SCHD and XLF.
It said brokerages expect the money move from tech stocks to value stocks to continue, driven by AI bubble concerns, geopolitical tensions and a re-rating of traditional industries.

A wall of cash is flowing into traditional sectors such as energy and industrials, which had been sidelined for some time amid the artificial intelligence (AI) rally. With the AI tech-led surge losing steam, expectations are growing that funds will rotate into value stocks for the time being, as a reassessment of traditional industries coincides with an escalation in Iran-related geopolitical tensions.

According to ETF.com on the 19th (local time), the Energy Select Sector SPDR (XLE), listed on U.S. exchanges, has seen net inflows of $4.128 billion (about 5.9897 trillion won) so far this year. The ETF, which invests in fossil-fuel companies such as Exxon Mobil, ranked No. 1 in net inflows among U.S. thematic equity ETFs over the period. Inflows in the past month alone totaled $2.657769 billion, the largest monthly net inflow since September 2008—17 years and four months ago. This contrasts with last year, when $8.09 billion flowed out as investors shunned the fund.

Large sums are also pouring into ETFs tied to industrials, dividend stocks and financials. Net inflows into the Industrial Select Sector (XLI), a flagship ETF for the industrials sector, reached $2.1692 billion so far this year. Over the same period, $2.0909 billion also piled into the dividend ETF Schwab US Dividend Equity (SCHD), well known among South Korean investors by the nickname “Syudeu.” The Financial Select Sector (XLF) logged net inflows of $1.7787 billion during the period.

Brokerages said traditional industries are being re-rated amid AI bubble concerns driven by valuation pressure (share-price levels relative to earnings) and heightened geopolitical tensions. Investor sentiment toward AI-related stocks, especially software names, also cooled as fears emerged over disruption in the software industry from the advancing sophistication of AI. XLE has returned 22.52% so far this year, handily beating not only the S&P 500’s gain (0.24%) over the same period but also the 13.9% return of the VanEck Semiconductor ETF (SMH). XLI and SCHD also rose 13.68% and 15.09%, respectively, during the period.

Experts expect the rotation from growth to value to continue for the time being. Peter Oppenheimer, Goldman Sachs’ chief global equity strategist, said, “As Big Tech’s AI investment has surged, investors have begun to question whether AI can generate sufficient returns on those investments,” adding, “Because the AI revolution is directly linked to electricity, infrastructure and industrial equipment, companies holding these real assets—rather than AI tech stocks—are being re-rated.”

Reporter Maeng Jin-gyu maeng@hankyung.com