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U.S. financial services companies including banks, trading firms
and those working in capital markets were among the most
sought-after stocks in the week ended Sept. 1, according to the
note by Goldman's prime brokerage desk, which serves hedge
funds.
The ratio of long trades compared with short positions on U.S.
regional banks has risen by 26% since a year low in mid-July
2023, when traders were mostly short the sector, the bank said.
A short or bearish bet borrows a stock in order to sell hoping
its price will decline.
An index of U.S. regional bank stocks has recovered roughly 20%
of its value from a two-year low hit in May following the
failure of Silicon Valley Bank, Signature Bank and First
Republic.
Treasury Secretary Janet Yellen said in May that nearly all
banks had access to sufficient liquidity, but warned that profit
pressures might lead to consolidation in the sector.
Short positions on larger U.S. banks have also declined since
mid-July, with hedge fund long positions rising about 14%
against short bets, the Goldman note showed.
Most of the stock buying on U.S. regional banks comprised of
hedge funds buying back stock that was borrowed for the purpose
of short bets, or so-called short covering, Goldman said.
Across broader U.S. financial services, hedge funds finished
August with net long positions, the note said.
The sector often includes companies such as larger banks,
savings and loans, asset management companies, credit services
and investment brokerage firms.
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and
David Holmes)
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