Industry Updates

Inflows for financials ETF as investors bet on banking recovery

XDWF returned 9% in the first two weeks of February as financial blue chips rallied

Jamie Gordon

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The DWS world financials ETF booked strong inflows last week as investors gained exposure to the February rally in bank stocks. 

According to data from Ultumus, the $706.1m Xtrackers MSCI World Financials UCITS ETF (XDWF) saw a 29.9% increase in assets under management (AUM) courtesy of $162.9m inflows during the week to 12 February.  

This followed another uptick in optimism for cyclical sectors as vaccine rollouts caused financial equities to outperform in recent weeks. 

Sidi Kleefeld, head of sales at DWS, said: “We’ve seen an uptick in investor interest in the financials sector on the back of market interest rates going up, particularly in the US, and with the outlook for banks improving.

"Also, the economic recovery is helping some banks as we are seeing [fewer] bankruptcies and therefore less provisioning, which is earnings accretive.”

Having dropped by 2.5% in 2020 and 5.5% in the last half of January, XDWF has returned 9% since the start of the month, as at 16 February. 

Tracking the MSCI World Financials index, the ETF offers exposure to 232 large and mid-cap stocks in the financial sector. 

Among its top 15 holdings, seven blue chip banking stocks outperformed the ETF’s net return rate – JP Morgan, Bank of America, Citi, Wells Fargo, HSBC, Morgan Stanley, Goldman Sachs – and hold a combined weighting of 17.8%. 

The individual equities returned 11.6%, 14.6%, 9.7%, 15.3%, 11.5%, 12%, and 13%, respectively since the start of February, with these kinds of rallies impressive but unlikely to be sustainable. 

With that being said, the consensus remains in favour of value and cyclical equities, as investors predict a pandemic recovery will continue the moment shift away from many of the growth stocks of 2020, and back towards the COVID-19-ailed sectors such as industrials, travel, construction, energy, and finance. 

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