UK hedge fund denies ‘attack’ on Icelandic market

Lansdowne Partners, one of the four hedge funds named by Chairman of Kaupthing Bank for the recent ‘attack’ on the Icelandic market, has denied the bank´s allegations according to a number of reports in the Icelandic media.

Andrew Honnor, spokesman for Lansdowne Partners, said “Such allegations – that we are manipulating share prices – are extremely serious. We absolutely deny it.” His comments appeared on the Icelandic news sites and Iceland Review on Thursday.

Chairman of Kaupthing bank, Sigurdur Einarsson, told on Wednesday that four hedge funds based in London had instigated a systematic attack on the Icelandic financial market and Icelandic banks, and had gone to great lengths to profit from taking short positions in stocks and credit default swaps (CDS).

Einarsson named the hedge funds involved as Trafalgar Fund, Ako Capital, Cheney Capital and Lansdowne Partners.

According to Einarsson, these funds systematically contacted the UK media and analysts from UK banks in an attempt to widen CDS spreads and bring down the share price of the banks.

Einarsson said that although the funds’ plans have succeeded in the short term, they will inevitably fail in the long term. He believes that foreign media and analysts are now approaching financial news on Iceland with more caution than before. “You can’t fool people over and over again,” he said.

The denial by Lansdowne Partners follows comments made by the Central Bank of Iceland which attributed the recent rapid devaluation of the Icelandic currency to a speculative ‘attack’ by ‘unscrupulous dealers’. The Icelandic krona (ISK) has fallen by as much as 25 percent against the euro this year.

The Prime Minister of Iceland, Geir Haarde, said at a meeting of Nordic political leaders in Sweden on Wednesday: “It’s clear that there are people out there trying to make money at our expense, and we want to get them off our backs.”

The Central Bank has already asked the Icelandic Financial Services Authority to investigate whether or not investors had deliberately spread false rumours to the media in order to bring turmoil to the Icelandic financial markets.

Meanwhile the Central Bank raised its key interest rate to 15.5% on Thursday in order to protect the currency and control mounting inflation.

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