Santander UK fund starts buying banks

LONDON (Reuters) - Santander UK Growth Fund said it has dipped back into buying banks with a slight overweight as they are cheap at a time when liquidity injections by major central banks is helping alleviate short-term cash pressure.

Richard Moore, manager of the Santander UK Growth Fund, said in a note he took profit on defensive Vodafone (VOD.L) to partly fund the move back into banks. However, he remained interested in the telecoms sector as he had increased his exposure in Cable & Wireless (CW.L).

"One recent change I have made is to buy back into the banking sector, where the fund is now slightly overweight," he said.

"Valuations were relatively low ahead of the reporting season and we have seen a rally since then, with banks further helped by the liquidity injection by global central banks, led by the U.S. Federal Reserve."

Moore said the action by the central banks had given banks more flexibility over lending in the short-term. However, they still faced the problems of slower growth and rising bad debts, he added.

Within the financial sector, Santander UK Growth Fund also favoured insurers on attractive valuations, while Moore said he was keen on stocks such as hedge fund Man Group (EMG.L) and mezzanine finance specialist Intermediate Capital (ICP.L) that can benefit from market volatility.

The fund remained overweight the oil sector but Moore said he had moved into exploration and production firms, such as Cairn Energy (CNE.L) and Premier Oil (PMO.L), and away from integrated oil companies by selling some exposure to Royal Dutch Shell (RDSa.L) (RDSb.L).

Santander UK Growth Fund is part of Santander Asset Management, which manages 150 billion euros (118 billion pounds) of assets.

Moore also said he had raised his position in Wm Morrison Supermarkets (MRW.L), which he expected to benefit from higher food prices.