Opportunities for Financial Stock Prices in 2026 — From High-Yield Fixed Deposits to Capital Appreciation

Taiwan’s stock market hovers around 28,000 points, fluctuating at high levels. Although the AI boom in electronics stocks remains strong, more investors are noticing an opportunity: financial stocks are brewing for a rebound, and their dividend yields are far better than bank fixed deposits. Imagine putting your money into a fixed deposit earning only 2% interest for a year, then shifting to financial stocks that can reliably provide a 5-7% cash yield, with a chance for stock prices to rise. This gap is hard to ignore.

Is now the time to invest in financial stocks? How should investors with different risk tolerances choose? Today, we’ll clarify the logic behind financial stock price performance and how small investors can start building positions from just 10,000 NT dollars.

Why Financial Stocks Deserve Attention

Reasonable Valuations and Capital Rotation

Most of the global stock market rally has been concentrated in electronics, especially AI supply chains. But after significant gains, P/E ratios have soared above 30, while profit growth is hard to sustain at last year’s explosive levels. In contrast, large bank stocks typically have P/E ratios around 10-12, compared to 25-30+ for tech stocks, making financial stocks more attractive valuation-wise.

As economic soft landing becomes clearer, capital is shifting toward value stocks with stable profits and dividends. This isn’t just a trend but a natural market reassessment of risk and reward.

Less Pessimistic Impact of Interest Rate Environment on Financials

Although the Fed is entering a rate-cut cycle, which may pressure net interest income, remember that Taiwan’s financial holdings have already earned over 560 billion NT dollars in the first 11 months of this year, setting a record high. I observe that as long as the economy avoids a hard landing in 2026, overall dividend payout capacity of financial holdings is likely to be stronger than this year, not weaker. Naturally, there’s room for stock prices to catch up.

Strong Defensive Characteristics, Less Volatility Than Tech Stocks

Funds are moving from electronics to defensive sectors like Fubon Financial and Cathay Financial, which have performed well recently. In a mild recession in 2026, well-capitalized financials with good loan quality tend to decline the least. The 2022 bear market is a good example—Taiwan’s weighted index fell over 20%, but financial indices dropped less than 15%.

This “attack when possible, defend when necessary” trait is especially valuable. Tech stocks can fall 10% on a pullback, while financial stocks often only wobble 3-5%, making them psychologically easier to hold.

The Key to Valuation Recovery: Global Value Stock Revival

Currently, the market shows signs of a “value stock revival.” As global stocks rotate, after the slowdown of the Magnificent 7 tech giants, funds naturally flow into undervalued, high-yield financial stocks. Many financial stocks trade at P/E ratios of 15-20, with stable dividends, providing a buffer during market volatility.

Of course, financial stocks are not without risks. If in 2026 the Fed cuts rates less than expected, or if economic slowdown and trade tensions worsen, default rates could rise, increasing volatility. Diversification is recommended—don’t put all your eggs in one basket.

Types of Financial Stocks and How Small Investors Can Choose

Financial stocks generally include banks, insurance companies, and securities firms. In Taiwan’s over a thousand listed stocks, about 49 are financial-related.

Main Types of Financial Stocks

Financial Holding Companies are the most popular choice due to diversified operations, risk spreading, and stable dividends (many above 5%). Examples include Cathay Financial, Fubon Financial, and CTBC Financial—perennial favorites.

Pure Banks suit those seeking stability, with low volatility and steady operations, like Chang Hwa Bank.

Insurance and Securities Stocks tend to be more volatile and are better suited for market trend shifts. For example, when trading volume surges and everyone rushes into stocks, securities firms often lead the rally; or when interest rates rise or fall sharply, insurance stocks tend to move more noticeably.

Fintech Stocks focus on digital payments and fintech innovation, such as PayPal, Mastercard, Square—these are more tech-oriented.

How Small Investors Can Enter

If your capital is limited, start with financial ETFs (like 0055 Yuanta Financial, 006288U Financial ETF). They have low thresholds and diversification. For short-term adjustments, derivatives like CFDs with zero commission and low spreads are options, and practicing with demo accounts reduces risk.

Four Taiwanese Financial Stocks Recommended for Valuation Recovery (2025 End Data)

Based on latest data and institutional forecasts, here are four financial holdings and one bank, each with different strengths suitable for various investors. Each stock’s rationale is carefully analyzed:

Fubon Financial (2881)—A Stable Choice Among Leaders

Fubon is Taiwan’s top financial holding, with stable contributions from its insurance (Fubon Life), rapid growth in wealth management and digital banking. 2025 EPS is estimated at 4.5-5 NT, with a P/E around 12, still undervalued. Its active branding and sponsorships (sports events, marketing) add long-term value.

Risks: Geopolitical risks in overseas markets like Hong Kong and Southeast Asia could impact profits.

Cathay Financial (2882)—Largest Growth Potential in Southeast Asia

Cathay’s insurance business in Vietnam and Thailand is growing fast, with wealth management fees up 15% annually. EPS forecasted at 4 NT, P/E at 11, attractive valuation. If interest rates stabilize in 2026, profits could rise further.

Risks: Sensitive to interest rate changes; rapid rate cuts could squeeze margins.

CTBC Financial (2891)—Leader in Digital Transformation

CTBC’s digital transformation is leading, with a 20% growth in mobile banking users by 2025. Exposure to China offers potential, with EPS around 2.8 NT and P/E of 13. Its growth could surprise if China’s economy recovers.

Risks: High uncertainty in Chinese policies may affect some operations.

E.Sun Financial (2884)—Conservative Favorite

E.Sun focuses on SME loans and retail banking, with 10% growth in net interest income. Its conservative management appeals to cautious investors. EPS around 2.5 NT, P/E 12, suitable for long-term holding.

Risks: Business concentrated in Taiwan; domestic economic slowdown could slow growth.

Chang Hwa Bank (2801)—Lowest Valuation Among Pure Banks

Chang Hwa is a pure bank with high capital adequacy, stable loan quality, and 12% growth in wealth management. EPS estimated at 1.5 NT, P/E 10, one of the cheapest options.

Risks: Single-focus banking business; growth limited compared to diversified holdings.

US Financial Stocks Performance and Investment Directions

Here are some US financial stocks favored by institutions for 2026, covering diversified banks, investment banks, and insurance giants. Taiwanese investors can buy via cross-trading apps or through financial ETFs.

Berkshire Hathaway (BRK.B)—The Most Stable Defensive Stock Globally

Led by Warren Buffett, Berkshire Hathaway is the world’s most famous investment conglomerate, owning insurance (GEICO), railroads, energy, manufacturing, and holding large positions in Apple, American Express, etc. It acts like a giant investment fund, using insurance premiums to buy good companies and generate long-term compound growth. Many call it “the most stable defensive stock in US equities.”

JPMorgan Chase (JPM)—The All-Round Powerhouse of US Banking

The largest US bank, covering retail, investment banking, wealth management, credit cards, with over 300,000 employees and a market cap over $800 billion. If capital markets stay hot in 2026, profit growth potential is high, with reasonable valuation.

Bank of America (BAC)—Closest to American Daily Life

Second-largest US bank, focusing on everyday banking—accounts, mortgages, credit cards, wealth management. Over 68 million customers, the largest deposit base in the US. It’s most aligned with American consumers’ daily financial needs.

Goldman Sachs (GS)—Wall Street’s Famous Investment Bank

Specializes in M&A, IPOs, trading stocks and bonds. Clients are mainly corporate executives and institutional investors. Less accessible to retail investors. If you believe the capital markets will stay hot in 2026, GS has explosive potential but also higher volatility. Limit to 20% of your portfolio and time your entry carefully.

American Express (AXP)—High-End Consumer Loyalty

Global credit card leader targeting high-net-worth clients, with services including credit cards, fees, travel. Its revenue mainly comes from card fees, not interest. Customers are wealthy, spend freely, and economic cycles have less impact on its earnings.

Small Investors Starting with 10,000 NT Dollars in Financial Stocks

Fixed Income Approach: Steady Dividend Income

Many treat financial stocks like “fixed deposits,” collecting annual dividends. This is feasible but not a perfect substitute for bank deposits. Financial stocks offer higher returns but also come with volatility and risks, so shouldn’t be viewed as risk-free.

For passive income, starting with ETFs like 0055 or a few stable financial holdings is a good approach.

My own strategy:

1. Stock Selection Criteria

• High dividend yield (≥5%), low P/E (Taiwan financial holdings 10-15x, US 15-20x), stable profits
• Taiwan: Fubon, Cathay, E.Sun
• US: JPM, BAC

2. Entry Timing

• During market high and electronics stocks pull back, capital tends to rotate into financials
• Or when dividend yields exceed 6-7%, buy in stages

3. Holding and Adding

• Buy and hold, collecting dividends annually
• Set target prices but adjust as company fundamentals improve (e.g., raise target from NT$50 to NT$60 if earnings grow)
• Buffett’s “time is a friend of good companies” applies; mature industries like financials benefit from long-term holding

4. Exit or Reduce

• When target price is hit or dividend yield drops below 4% (indicating stock price has risen too much), consider trimming or selling
• Reallocate to undervalued opportunities

Over years, returns mainly come from dividends and stock appreciation, with less need for daily monitoring.

Swing Trading: Suitable for Economic Cycles

Financial stocks are cyclical, making them suitable for swing trading—short to medium-term strategies based on technical analysis. Using moving averages, support/resistance, RSI, traders can profit from upward moves in bull markets and downward moves in bear markets, providing flexibility.

Risks and Defensive Measures in Financial Stock Investment

Market Risks—Black Swans Can Hit Financials

Financial stocks are sensitive to market swings. During bear markets, indices can fall sharply, and systemic risks (black swans) can severely impact financials. History shows: in 2015 China A-share crash, Taiwan’s 0050 fell 24.15%, and 0055 dropped 36.34%. During crises, banks can even fail—like Russia’s Sberbank, which plunged 50% in days after the 2022 Ukraine invasion, trading as low as $0.01 on foreign exchanges.

Interest Rate Risks—Rising or Falling Rates Affect Profits

Higher interest rates benefit banks by widening net interest margins, but prolonged low rates can squeeze profits. Predicting rate moves is difficult, and rapid changes can cause turbulence.

Loan Default Risks—Economic Slowdowns

Loan defaults increase during economic downturns, raising bad debt risks. Banks with high loan quality and good capital buffers are better positioned.

Defensive Principles

Diversify your holdings; don’t concentrate all funds in one stock. Keep an eye on economic indicators, interest rates, and corporate earnings, and review your portfolio periodically.

Long-Term Value and Outlook for Financial Stocks

As mature market pillars, financial stocks may lack the explosive growth of tech, but in the S&P 500, they account for about 13%, with potential to outperform over the long run.

Long-Term Investment Advantages

Stable Performance
Over 30 years, financials have grown faster than the economy, paying higher-than-average dividends and maintaining stable P/E ratios.

Government Support Due to Regulation
Financials are tied to the health of the global economy; governments tend to support big banks during crises (e.g., post-2008 bailouts), reducing systemic risk.

Strong Defensive Nature
Banking and insurance are closely linked to the economy, with less volatility than tech stocks.

Outlook for 2026 and Beyond

If the US avoids recession, many banks could see bright prospects. Higher interest rates generally expand net interest margins, boosting profits. While rapid rate changes can cause short-term chaos, over time, banks can adjust their assets and liabilities, positioning for stronger earnings.

All depends on avoiding a hard economic landing. If that holds, financial stocks should have room for a rebound.

Summary: When and How to Invest in Financial Stocks

Financial stocks, after the recent tech rotation, are now relatively valued. Taiwanese investors can consider US financial stocks or increase holdings in Taiwan’s financials—timing is good due to reasonable valuations and stable dividends with growth potential.

Key Points:

1. Valuations are recovering; P/E ratios are reasonable, dividends stable
2. Small investors can start with 10,000 NT dollars via ETFs or staggered stock purchases
3. Fixed income approach suits conservative investors; swing trading suits cyclical believers
4. Taiwan favorites: Fubon, Cathay, E.Sun
5. US favorites: JPM, BAC, Goldman Sachs, American Express
6. Always manage risks; avoid putting all funds into one stock
7. Long-term, financial stocks have rebound potential, but watch for interest rate, economic, and geopolitical risks

Financial stocks won’t make you rich overnight, but with a 5+ year horizon, treating them as steady income assets, regularly adding to positions, and timing swings, you can achieve solid compound returns.