FTSE 100: 6445.25 ▼ -62.47 (-0.96%)
Defensive positioning in the US is still required despite the government buyout of Fannie Mae and Freddie Mac, says Henderson's global fund manager Manraj Sekhon.
Sekhon, who manages the Henderson International fund , said he has slowly been buying back into the financials sector but firmly believes a defensive stance is still required.
He said: 'Equity markets are unlikely to stabilise until bank shares stabilise. The US government package is a major step in this process but we are not yet through this clear-out. The key question for the wider economy remains how bank de-leveraging will restrict credit availability across all industries and how the world re-adjusts to a credit-scarce environment. Although valuations are getting attractive in places, until greater clarity emerges, a more defensive positioning is called for.'
Sekhon has been avoiding banks and financials for nearly 18 months. He recently began buying back into the beaten up sector on a global basis as he feels a lot of attractive opportunities have been created by stocks which have been hit by the correction, despite having strong balance sheets and good business models.
He is particularly interested in a number companies with asset management business including Lazard and Credit Suisse.
Despite being hit hard by the downturn, Lazard has a strong asset management business, he said. The valuations reflect how it has suffered on the back of the financials correction but the fundamentals are sound and it is well positioned for a good recovery.
Meanwhile, Credit Suisse has been much more resilient in the difficult conditions and has been enjoying meaningful net inflows, he added.
Looking ahead, the manager feels global growth remains at risk and could put further pressure on earnings growth.
He said: 'Despite the negatives, valuations are attractive and balance sheets outside of the financial sector are strong in some regions. This should limit the downside and allow the market to begin to price in an improving economic outlook as we look towards 2009.'
According to Lipper, the Henderson International fund has outperformed both peers and benchmark over one and three years. The fund returned 30.3% over three years to the end of August, versus an average IMA Global Growth manager return of 19% and an MSCI World TR USD benchmark return of 19.2%.Over one year to the end of August the fund returned 4.9% compared to a peer group loss of 4% and a benchmark loss of 2.2%.