Are financial stocks worth investing in this round? Funds are quietly flowing here, and small investors can also allocate with just 10,000.

Taiwan stocks hover around 28,000 points, with high-end consolidation. The rally in Tech Stocks has noticeably slowed, but an interesting phenomenon has emerged: large sums of capital are quietly shifting from high P/E electronic stocks to the financial sector. This is not a coincidence but a typical sign of capital rotation.

Compared to a fixed deposit with an annual interest rate of 2%, financial stocks can reliably provide a cash dividend yield of 5-7%, with potential room for stock price rebound. This incentive is strong enough. The question is: Is now really the right time to enter? This article helps you analyze and uncover the core logic behind investing in financial stocks.

Why are financial stocks suddenly gaining popularity now?

Valuation Arbitrage Effect

The main players in this round of global market rally are electronic stocks, especially AI concept stocks, but the problem is—P/E ratios have already surged above 30, yet profit growth has not returned to last year’s explosive levels. In comparison, large bank stocks still have P/E ratios around 10-12, while Tech Stocks are generally 2-3 times higher. When stocks rally too much, profit-taking naturally occurs, and capital flows into defensive stocks with reasonable valuations and dividend support.

Hidden Benefits of the Interest Rate Environment

Although the Federal Reserve is entering a rate-cutting cycle, which may put some pressure on banks’ net interest income, the actual situation isn’t as bleak as it seems. Taiwan’s financial holdings have already earned over 560 billion NT dollars by November this year, setting a record high. Looking ahead to 2026, as long as the economy avoids a hard landing, overall dividend-paying capacity could be even stronger—thanks to more robust capital positions and better risk resistance.

The Defensive Value of Economic Cycle Stocks

Looking at the 2022 bear market, it’s clear: the weighted index fell over 20%, but the financial index declined less than 15%, with the smallest drop in bank stocks. In contrast, electronic stocks pulled back by about 10%, while financial stocks often only oscillated 3-5%. This “attack when appropriate, defend when necessary” characteristic is especially valuable in high-level oscillation environments, making the psychological burden much lighter.

Overall, the market is showing signs of a “value stocks revival.” When popular targets like Magnificent 7 slow down, capital naturally flows into financial stocks with P/E ratios of 15-20 and stable dividends, forming a natural safety net.

How to differentiate among financial stocks? Which type is most suitable?

There are about 49 listed financial stocks in Taiwan, but their strategies vary:

Financial Holding Companies: The Most Popular Choice
Banks, life insurance, securities, and asset management companies all operate simultaneously, with large asset scales and diversified businesses. Fubon Financial, Cathay Financial, and CTBC Financial are common favorites, with dividend yields mostly between 5-7%, suitable for beginners.

Bank Stocks: For Stability
Purely engaged in deposit and loan business, with small volatility but less growth potential compared to financial holdings. Chang Hwa Bank and Taichung Bank are more straightforward, suitable for those wanting to “hold steady.”

Insurance & Securities Stocks: More Volatile
Insurance is sensitive to interest rates; securities depend on trading volume. They only become interesting when market trends clearly shift—for example, when trading volume surges and everyone is frantically chasing stocks, securities stocks tend to lead the rally.

Fintech Stocks: The Future Direction
Digital payment concept stocks like PayPal and Mastercard grow quickly but are also more volatile.

Limited budget? Financial ETFs (0055 Yuanta Financial, 006288U Financial ETF) have low thresholds and automatic diversification, making them the easiest choice.

Which Taiwanese financial stocks are worth chasing?

Based on latest data and institutional forecasts, these five stocks cover different characteristics:

Fubon Financial (2881): Dual Engines of Insurance + Wealth Management
Start of the year at NT$65 → end of the year NT$85, up 30%. Stable contributions from insurance subsidiaries, rapid growth in wealth management, and effective branding. EPS estimated at 4.5-5 NT dollars, P/E ratio of 12. The only risk is overseas expansion encountering geopolitical fluctuations.

Cathay Financial (2882): Southeast Asian Insurance Dividends
Start NT$50 → end NT$68, up 36%. Strong growth in Vietnam and Thailand insurance businesses, with wealth management fees increasing 15% annually by 2025. EPS estimated at NT$4, P/E ratio of 11. The risk: insurance is sensitive to interest rates; rapid rate cuts could lower investment returns.

CTBC Financial (2891): Digital Transformation Leader
Start NT$28 → end NT$36, up 28%. 20% growth in mobile banking users, exposure to the Chinese market offers potential. EPS estimated at NT$2.8, P/E ratio of 13, with significant growth potential. But Chinese policy risks should not be overlooked.

E.SUN Financial (2884): The Steady Player
Start NT$25 → end NT$32, up 28%. Focused on SME loans and retail banking, with a 10% annual increase in net interest income. EPS estimated at NT$2.5, P/E ratio of 12, very suitable for long-term fixed deposit strategies. The downside is business concentrated in Taiwan, with limited growth space.

Chang Hwa Bank (2801): The Cheapest Pure Bank
Start NT$16 → end NT$20, up 25%. High capital adequacy ratio, stable loan quality, 12% growth in wealth management. EPS estimated at NT$1.5, P/E ratio of 10—most affordable valuation among banks. But its pure banking focus lacks the diversified advantages of financial holdings.

US financial stocks are also on the rise

Top US stocks favored by institutions for 2026:

BRK.B (Berkshire Hathaway): Warren Buffett’s Flagship
Annual gain of 25-30%. Essentially a super-large investment fund, using insurance cash flow to buy quality companies, earning compound interest long-term. Cash holdings reach $380 billion, dubbed “the most stable defensive stock in US stocks.”

JPMorgan Chase (JPM): The Largest US Bank
Annual gain of 30-35%. All-around banking services. Leading investment bank, M&A revival, net interest income expected at $9.5 billion. If capital markets stay hot in 2026, profit growth potential is highest.

Bank of America (BAC): The Second Largest US Bank
Gain of over 35%. Over 68 million clients, the largest deposit scale in the US. Profits from everyday financial services, stable operations. Share buybacks and increased dividends make it a favorite among investors.

Goldman Sachs (GS): Top Wall Street Investment Bank
Gain of 25-30%. If capital markets remain active in 2026, M&A and IPO businesses will be explosive. But volatility is also high; recommend no more than 20% of your portfolio.

American Express (AXP): High-End Credit Card Leader
Gain of 20-25%. Strong customer spending power. Earns mainly from card transaction fees, relatively stable regardless of economic cycles, with less volatility than traditional banks.

How to operate financial stocks as fixed deposits for steady profit?

Financial stocks can indeed serve as “fixed deposit stocks,” but they are not perfect substitutes—dividends are paid, but there are also fluctuations and risks.

Stock Selection Logic is Simple

• Dividend yield at least 5% (consider exiting if below 4%)
• P/E ratio below 15 (Taiwan financial holdings) or 20 (US financial stocks)
• Stable profits without major crises

Fubon Financial, Cathay Financial, E.SUN Financial, JPM, BAC all meet these criteria.

Timing of Entry is Critical
Ideal to buy during high market consolidation or after electronic stocks have rallied and pulled back—this is when capital tends to rotate into financials. Alternatively, buy in tranches when dividend yields reach 6-7%.

Holding Strategy Should Be Flexible
The basic approach is to hold and collect dividends annually. No need to set rigid target prices—if profits improve, raise your target. When your psychological target price or dividend yield drops below 4%, consider trimming and shifting into other assets. Buffett said, “Time is the friend of a good company,” especially true for mature industries like financial stocks.

This way, most returns come from dividends and stock price rebounds, without daily monitoring. But remember, behind the seeming stability of financial stocks, risks also exist.

Three major risks of investing in financial stocks

Market Risk is the Most Severe
During bear markets, the index’s bottom is hard to predict, and financial stocks often fall more sharply. In the 2015 China A-share crisis, Taiwan 50 index dropped a maximum of 24.15%, but Yuanta Financial ETF fell 36.34%. In systemic risk events, financial industry bears the brunt.

Interest Rate Risk is the Most Hidden
Rising interest rates benefit banks (widening deposit-loan spreads), while falling rates do the opposite. Investors cannot precisely predict interest rate movements and must adjust positions periodically.

Loan Default Risk is the Most Concrete
Financial institutions are involved in various industries; if companies fail to repay debts, it becomes bad debt for banks. After the Russia-Ukraine war in 2022, Sberbank’s stock plummeted 50 within days, even dropping to $0.01. During financial crises, bank failures are also possible.

Recommended Approach: Don’t put all eggs in one basket—diversification is essential.

Cyclical stocks are suitable for swing trading

Financial stocks are highly cyclical, making them more suitable for swing trading rather than buy-and-hold. Using technical analysis indicators (moving averages, support/resistance, RSI, etc.) to profit from alternating bull and bear phases offers greater flexibility.

Can financial stocks still outperform the market long-term?

Financial stocks account for up to 13% of the S&P 500. Although they lack the explosive growth of tech stocks, their long-term performance has the potential to beat the market. Why?

Stable Long-Term Performance: Over the past 30 years, the earnings growth rate of the financial industry has significantly outpaced the overall economy, enabling financial companies to pay dividends above average, creating stable P/E ratios.

Implicit Government Support: The financial sector is tied to the health of the global economy; governments are unlikely to let major banks fail (as proven after the 2008 crisis bailout). Risks are lower than in other industries, and during recessions, they may even receive special support.

Economic Cycle Defensive Traits: Banks and insurance companies are deeply linked to the overall economy, with smaller fluctuations than tech stocks.

Investment Horizon is Key: For long-term holdings of five years or more, adding quality financial stocks to your portfolio is a wise choice.

Under conditions avoiding recession, many banks have promising prospects. Usually, they benefit from higher interest rates (widening deposit-loan spreads), and after short-term turbulence, long-term profitability tends to strengthen.

Summary

As pillars of mature markets, financial stocks may lack the excitement of tech stocks, but they occupy about 13% of the global stock market and have the potential to outperform over the long run. For Taiwanese investors, now is a good time to position in US financial stocks—valuation is relatively reasonable, dividends are steady, and growth potential exists. Small investors can start with financial ETFs or a few stable financial holdings, diversify risk, and steadily earn interest.