APAC ETF Flows: Diverging Trends Mark a Volatile Start to 2026

ETF flows across Asia-Pacific took a sharp turn in the first quarter of 2026, with the region recording USD 35 billion in net outflows and total assets declining to USD 2.36 trillion. At a headline level, this suggests weakening demand – but the underlying story is far more nuanced.  

The decline was driven almost entirely by China’s record outflows, masking continued strength across other markets. Excluding China, most APAC ETF markets recorded positive flows, particularly into large-cap equities, technology exposures, and real assets.  

Across the region, investor preferences converged around a few key themes: equities as a core allocation, real assets as a diversifier – especially gold – and the growing use of ETFs beyond traditional beta exposure. At the same time, regional differences remain pronounced, shaped by local investor bases, institutional activity, and product development. 

Want a deeper look at regional flows, asset growth, and category trends? Download the full Morningstar APAC ETF Flows Q1 2026 report for a comprehensive breakdown. 

Australia’s ETF market continued to expand in the first quarter of 2026, demonstrating resilience despite broader global volatility. The market gathered AUD 14.5 billion in net inflows, extending the momentum built during a record-breaking 2025.  

Investor demand remained firmly centered on equities, which attracted AUD 10.6 billion, while fixed-income ETFs added another AUD 2.3 billion as investors balanced growth with stability. Real assets also emerged as a growing area of interest, bringing in AUD 831 million and continuing a period of rapid expansion in commodity-linked exposures.  

Flows were broadly diversified across domestic and global large-cap strategies, as well as diversified credit and sovereign bond exposures – reinforcing a market driven by consistent, broad-based ETF adoption rather than short-term positioning. 

China’s ETF market experienced a historic reversal in the first quarter, with RMB 805.3 billion in net outflows, marking the largest quarterly decline on record. Assets under management fell sharply from RMB 5.85 trillion to RMB 4.83 trillion, underscoring the scale of the shift.  

The downturn was driven primarily by institutional redemptions from broad-based equity ETFs, particularly by Central Huijin, which led to RMB 787.5 billion in outflows from equity ETFs alone. Fixed-income ETFs also saw outflows as short-term capital exited the market.  

Despite the headline outflows, demand persisted in more targeted areas. Sector and thematic ETFs continued to attract inflows, alongside commodities, signaling a shift toward more selective exposures even as core beta strategies saw heavy withdrawals. 

Hong Kong’s ETF market stood out as a key growth engine in the region, attracting HKD 62.2 billion in inflows and pushing total assets to a record HKD 618 billion.  

Equity ETFs accounted for roughly half of total flows, with technology-focused strategies leading demand, particularly the CSOP Hang Seng Tech Index ETF. At the same time, investor interest expanded into leveraged and inverse products, as well as covered-call strategies, reflecting a broader evolution in ETF use cases.  

Hong Kong continues to illustrate how ETFs are evolving beyond passive exposure – becoming tools for income, tactical positioning, and strategy implementation. 

India’s ETF market delivered the strongest inflows in the region, with INR 724.9 billion in Q1 2026, the highest quarterly total on record.  

Flows were led by real-assets ETFs, which attracted INR 432.8 billion as investors increased allocations to gold and silver. Equity ETFs also saw significant demand, gathering INR 319.4 billion, with large-cap strategies playing a central role.  

These large-cap exposures were widely used for tactical allocation during volatility, reflecting continued growth in ETF adoption and usage sophistication across India. 

Japan’s ETF market saw a pronounced rebound in the first quarter of 2026, with inflows rising above JPY 1 trillion following several weaker quarters.  

The recovery was driven by equities alongside a surge in leveraged ETF activity, highlighting the role of ETFs in Japan as tools for short-term tactical positioning, particularly among institutional investors.  

At the same time, steady demand for gold ETFs reinforced the importance of real assets as a diversification tool, with total assets rising to nearly JPY 116 trillion. 

The first quarter of 2026 highlights a defining characteristic of APAC ETF markets: divergence beneath the surface. While headline flows turned negative, this was largely the result of concentrated outflows in China rather than a broad-based slowdown. 

Across the rest of the region, ETF markets continue to expand, supported by demand for equities and real assets, as well as increasing product innovation. Each market reflects a different stage – and style – of ETF evolution, shaped by local dynamics and investor behavior. 

For a deeper analysis – including category-level flows, fund trends, and provider insights – download Morningstar’s APAC ETF Flows Q1 2026 and China & Hong Kong ETF Flows Q1 2026 reports.