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Buxton ponders selling giant HSBC stake

Buxton ponders selling giant HSBC stake

Merian fund manager Richard Buxton is contemplating selling some or all of his shares in HSBC bank due the changing outlook for interest rates.

Mr Buxton runs the £1.8bn Merian UK Alpha fund, which has HSBC as its fifth largest holding, a stake valued at approximately £74m.

The fund manager told FTAdviser a key reason for his investment in HSBC was the expectation that US interest rates would rise for a prolonged period of time.

This would, he said, benefit HSBC because the bank has surplus deposits of about $300bn (£230bn), which are invested in US government bonds with a short date to maturity and cash, both of which have very low yields right now.

Higher interest rates would increase the return that HSBC can earn on this cash.

US interest rates rose several times in 2018, but the Federal Reserve, that country’s central bank, indicated earlier this month that it is unlikely to raise interest rates again this year.   

Mr Buxton said: "I am thinking about what to do with HSBC, if rates have peaked in the US then [this] damages the investment case we have for the shares."

On the broader outlook for the global economy in 2019, Mr Buxton said: "I think 2019 could be the reverse of 2018.

"Last year China slowed and that hurt Europe, while the US was strong. But policy makers in China are stimulating the economy this year, and that should help both China and Europe to grow.

"In contrast, as the world benefits from that stimulus the effect of the tax cuts in the US wears off, and the pace of growth in that economy slows."

The US Department of Commerce, which is responsible for GDP data in that country, revised downward the growth figure for the final three months of 2018 to 2.2 per cent, from the previous 2.6 per cent estimate.

Nick Ford, who jointly runs two US funds at Miton, said US retail sales have been weaker, indicating that a slowdown in the economy could be looming.

david.thorpe@ft.com