Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Global financial sector ETFs see huge inflows this year

EconomyJan 26, 2022 08:22AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A trader watches his chart while working on the floor of the New York Stock Exchange July 8, 2014. REUTERS/Brendan McDermid/File Photo

By Patturaja Murugaboopathy

(Reuters) - Global financial sector ETFs have seen vast inflows since the start of this year, according to Refinitiv Lipper data, as investors bought into a sector set to benefit from the rise in U.S. interest rates.

According to Lipper data, financial sector ETFs have seen net inflows of $6.3 billion between Jan. 1 and Jan. 24, more than any other sector.

"When interest rates rise, as will happen in 2022, banks' earnings will increase dramatically due to the higher interest rates, which creates a great spread between the interest they make lending and what they pay in interest," said Daniel Milan, managing partner at Cornerstone Financial Services, based in Michigan.

"This is why the financial sector ETFs are having the highest inflows, as they should be one of the best performing sectors due to the increasing rate environment."

Analysts also expect investment banking and trading revenues of the banking sector to be stronger this year, despite higher interest rates.

JPMorgan (NYSE:JPM), the second-biggest provider of worldwide M&A advisory after Goldman Sachs (NYSE:GS), expects some normalisation in investment banking revenue this year, but added that the overall deals pipeline remained healthy.

The Financial Select Sector SPDR Fund led with inflows worth $1.9 billion this year, while Invesco KBW Bank ETF and SPDR S&P Regional Banking (NYSE:KRE) ETF received over $500 million each.

Investors are broadly cutting their exposure to growth stocks they accumulated over the past two years after the Federal Reserve flagged aggressive plans to begin raising rates and remove monetary stimulus.

Growth sectors, including tech and internet firms, are more vulnerable to a rise in interest rates, as their future cash flows get diminished.

The MSCI World Growth index, which captures large and mid-cap stocks with higher forward earnings growth rates across 23 countries, has declined over 11.5% this year.

On the other hand, the MSCI World Value index, which captures cheaper stocks based on valuation ratios, fell just 2.4%.

According to Refinitiv data, financial sector stocks look cheaper in terms of the forward price-earnings ratios (P/E), which enhances their appeal.

The data shows large and mid-cap companies in the financial sector are trading at a forward 12-month P/E of 10.1, compared with the tech sector's 18.2.

Global financial sector ETFs see huge inflows this year
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email