Investors have avoided European financials, along with the sector-related exchange traded fund, for the better part of the past year. For the contrarian-minded trader, this may be an opportune time to start considering the Eurozone financial ETF, especially with the improving conditions.

The iShares MSCI Europe Financial Sector (NasdaqGM: EUFN) has gained 21% year-to-date, compared to the 22.1% drop over the past year.

Analysts believe the European equity markets may potentially reach new highs in the coming months due to the strengthening global economy, better corporate earnings and higher liquidity in the Eurozone, reports Alul Prakash for Reuters. [European Financials ETF Signaling Bull Market?]

“The market has the potential to go up further. Economic support is there and earnings are continuing to do well,” Anko Beldsnijder, managing director of MainFirst Asset Management, said in the report.

Greece has also agreed to initiate reforms and austerity measures to meet the requirements of a bailout and avoid a potential default. [Greece ETF Rallies on Bailout Deal Speculation]

“However, the market is sanguine about Greece and I would not expect a default by Greece,” an economist at a European fund company, said. “The European Central Bank’s action has reduced the threat of an outright credit crunch in the euro area.”

According to a S&P Capital IQ analyst survey, financial sector earnings across the S&P Europe 350 will expand 24% in 2012, reports Madison marriage for Investment Europe.

“On the whole, analysts expect cyclical sectors to recover their earnings growth in 2013 while continuing to lower their 2012 earnings forecasts. This implies analysts are optimistic about the future performance of European corporations despite expected recession this year,” Victoria Chernykh, director at S&P Capital IQ, said.

iShares MSCI Europe Financial Sector

For more information on Europe, visit our Europe category.

Max Chen contributed to this article.

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