By Patturaja Murugaboopathy

(Reuters) – The global financial sector ETFs experienced huge inflows over the past year according to Refinitiv Lipper data. Investors bought into a sector expected to reap the benefits of the rising U.S. Interest rates.

Lipper data indicates that ETFs in the financial sector have experienced net inflows exceeding $6.3 Billion between January 1 and 24, more than any sector.

Daniel Milan (Managing Partner at Cornerstone Financial Services, Michigan) stated, “When interest rate rises, as it will in 2022,”.

ETFs within the financial sector have the highest inflows. This is because they are expected to be among the top performing sectors, due to an increasing rate environment.

Analysts expect that the sector’s trading and investment banking revenues will be higher this year, even with rising interest rates.

JPMorgan (NYSE:), the second-biggest provider of worldwide M&A advisory after Goldman Sachs (NYSE:), 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:) ETF received over $500 million each.

Following the Federal Reserve’s announcement of aggressive plans for raising interest rates and removing monetary stimulus, many investors have begun to reduce their exposure to growth stock investments they have acquired over the past 2 years.

In order to reduce future cash flows, the growth sector of tech, such as internet and technology firms, is more at risk from an increase in interest rate.

The MSCI World Growth indicator, which measures large- and mid-cap stock with greater forward earnings growth rates, declined more than 11.5% in this year.

The MSCI World Value Index, which measures the value of stocks and captures them at lower prices, was down 2.4%.

Refinitiv data suggests that stocks in the financial sector are cheaper according to forward price/earnings ratios. This increases their appeal.

Data shows that large and medium-cap financial companies trade at forward 12 month P/Es of 10.1, as opposed to 18.2 for the tech sector.