By Svea Herbst-Bayliss and Lawrence Delevingne
NEW YORK/BOSTON (Reuters) - Hedge funds managers and other large investors believe it is far too soon to call an all-clear on turmoil in the global financial sector even after more than a week of financial lifelines, central bank assurances and a massive banking rescue deal.
In the past two weeks, two U.S. banks have collapsed, America's biggest lenders agreed to deposit $30 billion in another ailing firm, First Republic Bank, Credit Suisse Group AG needed a lifeline and at the end of a frenetic weekend agreed to be taken over by UBS.
Michael A. Rosen, chief investment officer of Santa Monica-based adviser Angeles Investments, said the UBS-Credit Suisse deal eliminated one potential source of instability, but fundamental problems in the banking system remained, mainly tight monetary policy.
"So maybe one hole in the wall has been plugged, but the water's rising," he said.
One hedge fund manager described trades in the financial sector as being "all over the map", with nobody agreeing on anything.
Some breathed a sigh of relief that a competitor stepped in with a rescue offer for Credit Suisse. Others worried that the $3.2 billion UBS will pay is far less than the $9.5 billion Credit Suisse was valued at on Friday, and one investor said the market may not consider this to be a positive.
Many of the roughly one dozen managers contacted on Sunday asked not to be identified because their firms prohibit them from discussing their trades with the media, or they did not want to make their views and positions public.
Others tweeted throughout the day.
Daniel Loeb, chief investment officer of U.S. hedge fund firm Third Point LLC, wrote on Sunday morning that initial news of the UBS offer for Credit Suisse would be "positive for financial system as it preserves the capital structure."
Later, short seller Jim Chanos tweeted his shock that $17 billion of Credit Suisse bonds would be wiped out, asking "What are the Swiss doing here…?!"
Chanos and Loeb did not respond to emails seeking further comment.
There was also little agreement on how investors would be positioning themselves in smaller U.S. banks, including First Republic.
First Republic's stock price tumbled 33% on Friday, one day after a handful of the country's largest banks, including JPMorgan Chase, organized a $30 billion rescue package that was supported by the Federal Reserve and U.S. Treasury.
On Sunday, credit rating agency S&P Global downgraded First Republic's ratings for the second time in less than a week, lowering its sovereign credit ratings to "B+" from "BB+". S&P maintained its outlook at "Creditwatch Negative."