Investors Jump Into ETFs That Got Pummeled During Latest Selloff

(Bloomberg) -- Investors in exchange-traded funds are buying the dip.

Cash is pouring into ETFs tracking areas of the market that have been pummeled in the October sell-off, like small-capitalization stocks and semiconductor manufacturers. The iShares Russell 2000 ETF, ticker IWM, saw inflows of more than $1.17 billion last week, and the VanEck Vectors Semiconductor ETF, ticker SMH, took in $492 million.

“It looks like the trading crowd doing some dip buying as a result of the recent drop,” said Eric Balchunas, Bloomberg Intelligence analyst.

Investors also added around $2.8 billion to the iShares Core S&P 500 ETF, ticker IVV, which along with the Russell 2000 fund saw the most inflows of all equity ETFs last week.

Investors Jump Into ETFs That Got Pummeled During Latest Selloff

“Demand for small-cap funds is a good indicator of U.S. risk tolerance as these funds provide diversification to up-and-coming companies,” said Todd Rosenbluth, director of ETF research at CFRA Research. “They are more exposed to a strong U.S. economy and less connected to overseas trends.”

The inflows came during a highly volatile five days for the financial markets. The S&P 500 Index fell 3.9 percent for the week, leaving it more than 9 percent below its September peak, while the Nasdaq Composite Index dropped 3.8 percent and the Dow Jones Industrial Average retreated 3 percent.

One industry sector where ETF investors are looking for value is chipmakers, which have gotten badly beaten up lately. The VanEck Vectors Semiconductor ETF, ticker SMH, is down more than 15 percent this month but just posted its best week of inflows since April.

“With the volatility, there’s an opportunity to make a quick buck,” Balchunas said. “There are some people excited about all this because, for a while, everything moved very steadily with no volatility. You can see the trader crowd running around trying all sorts of things.”

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