Bankers IT buys into ‘oversold’ oil majors

Henderson Global Investors’ £519m Bankers Investment Trust has boosted exposure to oil majors, taking the view the sector has been hit too hard in the downturn last month.

The global equity trust, headed up by Alex Crooke, has added 5% to oil majors by topping up positions in Shell, ENI and BP, which he believes have been “aggressively oversold”.

“We were around 4% underweight in the oil space but we feel they have been aggressively oversold in the sell off, falling 20% despite the oil price not moving an inch,” said Crooke.

“The majority of the cyclical stocks have fared badly over the past two months but I am optimistic the economic recovery will begin to pick up early next year. As a result cyclical stocks will recover from here.”

Crooke takes the view growth will remain sluggish but anticipates markets will receive a much needed boost in Q1 next year, in the event of China loosening its monetary policy.

He said with inflation peaking in the region the Chinese authorities may be forced to alter their tightening programme to keep the region competitive.

“The Chinese reserve requirement ratio is 22% and with the inflation numbers peaking in the region they really do need to release some of this cash to Europe to see more orders coming through,” said Crooke.

Crooke ruled out the prospect of a global double-dip recession as he believes US consumer spending is set to increase on the back of bank lending conditions easing.

“The US consumer is spending money but just not in the right places and with the housing market being overlooked it has damaged GDP as this makes up 25% of growth in the economy.

“However, with US housing now so affordable with prices between 30%-40% lower – consumers may now start buying again.”

Crooke added he is also looking to increase exposure to telecoms, while reducing his utilities weighting.

He believes with utilities yielding 6% on average they now offer little value as the sector’s margins continue to decline.

“Telecoms are very attractively priced, with the likes of Telefónica yielding 8%,” he said.