A-share ETF inflows concentrate; Nomura Orient International says they may ease selling pressure but are unlikely to drive a sustained reversal

Which indices attracted the flows?

As A-shares continued to weaken, ETFs tracking the CSI 300, ChiNext and STAR 50 recorded net subscriptions of 55.81 billion yuan, 20.42 billion yuan and 18.82 billion yuan, respectively, in the week ended 23 October.
Net subscriptions to these three categories of ETFs during the week accounted for 62.87%, 69.49% and 89.71%, respectively, of their net subscriptions over the preceding month, showing that recent inflows were relatively concentrated. The CSI 300 ranked first among the five indices attracting the most funds that week, which the institution believes indicates some preference for core large-cap assets.

Nomura Orient International believes sustained net ETF subscriptions help ease selling pressure on A-shares, but the source of the funds remains unclear, and market sentiment and trading conditions remain fragile after prolonged volatility. At the current pace and scale of inflows, a sustained reversal is unlikely in the near term.
The institution believes a sustained reversal may require markedly larger ETF inflows or stronger market support measures, such as the ETF purchases announced by Central Huijin and other state investors in April 2025, alongside positive corporate announcements, or the coordinated policy measures introduced in September 2024.

The effect of ETF inflows on individual stocks depends on their index weights, institutional ownership and trading by other investors, so the support from the same round of subscriptions may vary across indices and constituents.
Assets in ETFs related to the STAR 50 are approximately 41.4 times those of non-ETF funds tracking the index, with ETFs accounting for a substantial share of the relevant funds. The institution therefore examined differences in constituent stock holdings: after excluding the 20% with the lowest total market capitalizations as of 28 October, it ranked the stocks by the proportion of their free-float shares held by institutions in the first half of 2026.

Rising oil prices have heightened concerns about persistent inflation overseas, while financing pressures at some emerging North American cloud service providers have also contributed to fluctuations in risk appetite. Relatively high overseas long-term bond yields and recurring tensions in the Middle East constitute recent external pressures.
Nomura Orient International expects opportunities to reallocate into A-shares as market positioning and sentiment adjust, but recommends maintaining a defensive portfolio until volatility subsides. Over the medium term, opportunities remain largely structural amid obstacles to economic transformation; low domestic interest rates make high-dividend stocks more attractive, and their relatively low volatility also supports a defensive stance.