By Laurence Fletcher

LONDON (Reuters) - Equities look good value given the credit crisis is past its worst, fund manager James Henderson at Henderson Group said on Monday, adding he had been buying banks, housebuilders and engineers.

Henderson, who manages a range of funds including the 283 million pound Lowland (LWI.L: Quote, Profile, Research) and the 417 million pound Law Debenture (LWDB.L: Quote, Profile, Research) investment trusts, has increased his funds' borrowings in order to buy stocks and is optimistic lower interest rates will help boost equities over the medium term.

"I'm pretty optimistic. Valuations are relatively low, interest rates are coming down. In a medium term sense it's good for equity markets," he told Reuters.

"With a lowering of rates and the Fed's actions, the financial system ... having come to a grinding halt, is slowly starting to move ... We still think interest rates will be half a percentage point lower by the year end."

A year ago Henderson told Reuters he planned to build up cash levels because many stocks were no longer attractively valued.

Over the past year the FTSE 100 .FTSE has fallen 5.5 percent, but the index is up 8.4 percent over the past three months, boosted by hopes interest rate cuts in the United States and Britain will help revive economic growth.

Henderson said he has been buying banking stocks such as Barclays Plc (BARC.L: Quote, Profile, Research) and Lloyds TSB Group Plc (LLOY.L: Quote, Profile, Research) and plans to increase Lowland's exposure to the sector to between 15 and 16 percent from 12 percent.

"The core loan book in corporates isn't going to deteriorate hugely. Corporates are generally quite strong balance sheet-wise and they have got interest cover," he said.