Amid recent market volatility in China's stock markets, fund flows are shifting subtly, with technology exchange-traded funds (ETFs) - particularly those tracking the CSI 1000 and semiconductors - seeing strong inflows. Notably, South Korean investors are actively buying in Chinese ETFs focused on China's high-tech and advanced manufacturing sectors.

According to Shanghai Securities News on Monday, from May 21 to 22, ETFs tracking the CSI 1000 recorded net inflows of 3.696 billion yuan ($544 million), while semiconductor-related ETFs also attracted strong capital inflows.

Notably, on May 21 - amid market volatility - several China-listed ETFs recorded net purchases by South Korean investors. An analysis of the investments reveals investor focus on advanced manufacturing of China. Data from the Korea Securities Depository (KSD) shows that the ChinaAMC CSI Robot ETF attracted net inflows of $3.21 million, while the ChinaAMC CSI Grid Equipment Thematic ETF saw purchases exceeding $1.1 million, per the report.

Data released by the KSD showed that China's stock markets have emerged as a destination for South Korean retail investors, including semiconductors, electric vehicles, and consumption in the Hong Kong stock market have attracted growing attention, the China Securities Journal reported.

"South Korean retail investors' investment footprint has evolved from a primary focus on US mega-cap tech stocks and ETFs to a growing presence in China and broader Asia-Pacific markets. This ongoing shift reflects their confidence in the long-term prospects of China's economy amid the country's rapid tech breakthroughs," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies, Renmin University of China, told the Global Times on Monday.

Recent indicators, such as the accelerating producer price index, 15.5 percent year-on-year growth in industrial profits and the surge in corporate earnings in the first quarter - all point to a sustainable earnings recovery. Meanwhile, multiple factors including "deposit migration" of household savings, the sustained increase in margin balances, and the continuous expansion of thematic ETFs all indicate that incremental capital is flowing into the market, Meng noted.

Since the beginning of the second quarter this year, both domestic and foreign institutions have stepped up researches targeting listed companies. According to Shanghai-based financial data provider Wind Information, as of May 22, domestic mutual funds conducted over 12,000 surveys and foreign institutions conducted 1,400, with their focus squarely on high-growth sectors such as AI computing hardware, semiconductor equipment, and high-end medical devices.

And, a growing number of foreign investors are bullish on China's capital market.

China's supply chain resilience, energy cost advantage and progress in new quality productive forces - despite the Middle East conflict and trade frictions - have elevated its status as an investment destination for international investors," Tian Lihui, dean of the Institute of Financial Development at Nankai University, told the Global Times on Thursday.

"Against the backdrop of low interest rates, A-shares are expected to enter a 'slow bull' market. Chinese assets will remain appealing for overseas institutions and broad investors," Tian said.