Shorts could profit in choppy 2010

By Laurence Fletcher

LONDON (Reuters) - UK stock markets are unlikely to repeat a stellar 2009 performance next year, Octopus fund manager David Crawford said, making short-selling a likely winning strategy for investors again.

Crawford, who manages the Octopus Absolute Return fund, said the ailing economy made it unlikely 2010 would see an equally strong run in stock markets as this year, with the blue chip stock index up 19.3 percent year-to-date.

"There are extremely high government deficits, big issuance is needed in the bond markets, there is the potential for interest rate rises and there's consumer indebtedness," Crawford said in an interview this week.

"Overall the market dynamic looks less favourable, although it's hard to call next year. I'd be very surprised if it was as good a year (as 2009) ... Short selling may well be more of a feature of next year."

Short-selling, or betting on falling stock prices, was a winning tactic in a gloomy 2008 for stockmarkets, during which the FTSE 100 .FTSE fell by almost a quarter.

Hedge fund strategies focusing purely on shorting gained 14.9 percent, according to Credit Suisse/Tremont.

Octopus bets on falling as well as rising prices and has risen 95 percent since launch in March last year to mid-October. Over the same period the average peer fund has gained 7 percent and the FTSE All Share .FTAS index has lost 2 percent.

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