Where Are the Inflation Beneficiaries? 'Focus on Global Financial ETFs'

[Asia Economy Reporter Hwang Junho] As major countries' economies recover, the normalization of monetary policies by central banks is entering a full-fledged phase, leading to an analysis that the earnings of advanced country bank stocks are expected to improve.

Kim Hwan, a researcher at NH Investment & Securities, made this analysis on the 12th through a global strategy report, citing global bank stocks as beneficiaries of inflation.

Currently, major central banks such as the U.S. Federal Reserve (Fed) have set a tighter monetary policy stance faster than expected. This measure, taken in response to rising inflation, is causing increased volatility in global stock markets. The market expects the first U.S. benchmark interest rate hike to occur at next month's Federal Open Market Committee (FOMC) meeting, and until the direction of monetary policy is determined, stock market volatility due to policy uncertainty is considered inevitable. The uncertainty regarding the direction of liquidity released during the COVID-19 pandemic is expected to lead to increased stock market volatility.

In this situation, the banking sector is likely to benefit. First, benefits from rising interest rates are anticipated. While margin increases due to interest rate hikes are expected, earnings growth is also projected due to increased loan demand from economic recovery and eased lending conditions in the banking sector.

Researcher Kim stated, "The benefits will be relatively more pronounced for European banks and U.S. commercial banks, which have a large proportion of interest income," and added, "It is necessary to pay attention to ETFs related to advanced country bank stocks." Representative exchange-traded funds (ETFs) related to the banking sector include XLF, which tracks U.S. financial stocks, EUFN (US), and EXV1 (DE), which track European bank stocks.