South Korea's AI-focused equities faced a sharp 19% correction in July as investors moved capital toward other regions like Singapore and Brazil. Meanwhile, India-focused ETFs trailed global peers, pressured by domestic market sluggishness and currency depreciation. Investors are increasingly shifting focus from crowded AI-chip trades toward themes such as biotechnology, genomics, and cybersecurity.
Detailed Coverage
The global equity landscape experienced a notable shift in July 2026 as the intense rally in South Korean artificial intelligence and semiconductor stocks began to unwind. The iShares MSCI South Korea ETF dropped 19% during the month, marking a significant correction following a period of rapid growth. Despite this recent decline, the ETF maintains substantial gains when viewed over a longer timeframe, with an increase of 77% year-to-date and 140% over the past twelve months.
Capital Rotation to Singapore and Brazil
As investors booked profits from the AI-chip trade, capital flowed into alternative markets. Singapore and Brazil emerged as primary beneficiaries of this rotation. The iShares MSCI Singapore ETF recorded an 11% gain in July, bringing its year-to-date return to 19%. Similarly, the iShares MSCI Brazil Capped ETF saw a 4% monthly rise, continuing a positive trend with a 14% year-to-date performance and a 36% gain over the last year. These shifts suggest that global investors are becoming more selective, moving away from sectors that saw heavy concentrated buying toward markets with different growth drivers.
India ETFs Face Persistent Headwinds
India-focused investment vehicles struggled to keep pace with these global movements throughout July. The MSCI India ETF experienced a 1.5% decline over the month, reflecting broader domestic market weakness and the ongoing impact of rupee depreciation against major currencies. Year-to-date data for the MSCI India ETF shows a 10% decline, with a 12% drop observed over the past year. Even the small-cap segment, represented by the MSCI India Small Cap ETF, saw only a modest 1.7% gain in July, leaving its year-to-date performance slightly in the negative.
Emerging Themes Beyond AI
Market participants are increasingly looking beyond the previously popular AI theme, which is now viewed by some analysts as crowded. Data indicates that investors are showing renewed interest in sectors such as biotechnology and genomics, which posted gains of 16.2% and 21.1% respectively in July. Cybersecurity and insurance have also seen positive momentum.
Notably, there is a divergence even within the semiconductor sector. While South Korean AI-linked stocks faced pressure, the Harvest SSE STAR Chip Index ETF, which tracks Chinese semiconductor companies, outperformed its peers in July. Analysts suggest that future investment themes may revolve around pharmaceutical advancements, healthcare-related technologies, and specific pockets of the Chinese market. For investors, the key monitorable remains whether this rotation into sectors like genomics and pharma proves sustainable or if market volatility continues to affect sentiment across both emerging and developed economies.