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Moonraker fears fallout if banks have to sell stocks to pay back cash

Fund of hedge funds manager Moonraker is taking a cautious view on equities in its global opportunities fund.

The company says that it is still more bullish than its underlying hedge fund managers, who believe that the fundamentals do not justify the recent rise in equities.

Chief investment officer Jeremy Charleswoth says 90 to 95 per cent of the hedge fund managers with which Moonraker invests are negative on equities and believe that the market is susceptible to a pull back.

He says the market has bounced off the March lows but will remain ahead of itself unless a perfect recovery materialises, with growth rates of around 5 per cent.

His fears about the vulnerability of equity markets also relate to concerns that banks may have been using their bailout money to buy equities.
Charlesworth says British Bankers’ Association figures show that lending to businesses and individuals has fallen over the last couple of years He concludes that their money is going somewhere else, which could be the stockmarket.

He says banks have every right to use the money they have borrowed in this way and their balance sheets will benefit from holding equities if they sell in a rising market.

The problem would be if the central banks decide they want the bailout cash back. Banks would need to sell their equity holdings but doing so in a market where there are few buyers could lead to a major correction.

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