Bank ETF Outflows Depict Dimmer Prospects

NEW YORK (TheStreet) -- Dan Freed laid out five good reasons to steer clear of bank stocks yesterday.

In addition to more foreclosures, government meddling with stimuluses and regulations, a recovery that's already included in stock prices and a European contagion, his sixth reason could have been $55 billion that flowed out of financial-focused exchange traded funds for the week ending March 16, according to Marco Polo XTF. After all, you never want to be the last investor to head for the exit.

The withdrawals affected exchange traded funds including KBW Regional Banking ETF(KRE), PowerShares Dynamic Banking Sector(PJB) and iShares Dow Jones US Regional Banks(IAT).

Large U.S. banks held in financial ETFs weren't spared. Those include Wells Fargo(WFC), US Bancorp(USB) and PNC Financial Services Group(PNC).

Exceeding U.S. bank redemptions were Brazil's ITAU Unibanco(ITUB) and Banco Bradesco(BBD). Chinese bank holdings of ETFs followed.

Energy had the second-worst ETF outflows, with $40.3 billion. More than half of the withdrawals came from the integrated oil and gas industry, taking aim at U.S. stocks such as Exxon Mobil(XOM) and Chevron(CVX). Consider holding off on investments in iShares S&P Global Energy Sector ETF(IXC) and SPDR S&P International Energy Sector ETF(IPW) until investors are bullish that oil can crack $90 a barrel for good.

The third-worst sector, technology, suffered $35.3 billion in outflows, almost a third of that amount from semiconductor stocks. Taiwanese companies including Taiwan Semiconductor(TSM) and United Microelectronics(UMC) were hurt the most. A 6.4-magnitude earthquake hit southern Taiwan earlier this month. The pure plays in semiconductors to avoid are SPDR S&P Semiconductor ETF(XSD) and Semiconductor HOLDRS(SMH).

For the best rated exchange traded funds, check out our Top ETFs page.

-- Reported by Kevin Baker in Jupiter, Fla.

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