By Nell Mackenzie
LONDON (Reuters) – Hedge funds snapped up bank shares at the fastest clip in three years as they made bets against renewable electricity producers last week, a note from Goldman Sachs showed, as investors reacted to Donald Trump’s victory in the U.S. presidential election .
Financial stocks, such as banks and trading companies, were the most popular and net-bought sector on Goldman Sachs’ prime brokerage trading desk last week, the Friday and Monday note seen by Reuters showed.
While the note did not specify which banks in the region attracted the most attention, a second note also sent the same day by Goldman Sachs’ prime brokerage said U.S. banks would benefit.
Financial stocks are expected to get a boost from lighter regulation that many believe will come with the new Trump term, the second note said.
Financial companies were also seen benefiting from expected tax reforms, it added.
“There is room for further upside in U.S. financial sector positioning,” the second Goldman note said, adding that current hedge fund positioning in this equity sector has historically remained on the low side.
US bank stocks rose as much as 11.1% on November 6, compared to the previous day’s closing price after news of Trump’s election victory.
Prime brokerage desks lend to and arrange trades for hedge funds.
Long stock bets, which expected rising prices, were led by both banks and consumer finance, capital markets and financial services companies, the first note said.
The bullish bets focused on US stocks, but also included stocks in emerging markets in Asia. In Europe, hedge funds have exited their short positions and added long positions. A short bet expects the value of an asset price to fall.
Utilities saw their first net selling in four weeks, “driven almost entirely by short sales,” according to Goldman Sachs’ initial note.
Independent power and renewable electricity producers were the biggest sellers, with hedge fund bets against US utilities amounting to two short positions for every long position, the bank said.
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Andrew Heavens)
