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Bank of America’s Hedge-Fund Clients Boost Leverage in Asia

Hedge-fund clients of Bank of America Corp.’s Asian prime brokerage unit have increased their leverage since October as the market outlook improved, according to the second-largest U.S. bank by assets.

Gross leverage, which tracks hedge funds’ long and short positions as a multiple of the cash they get after selling all securities and repaying borrowings, have increased since late October through Jan. 17, said Ben Williams, Hong Kong-based head of Asia-Pacific financing sales in the bank’s Merrill Lynch unit. Shorting involves selling borrowed securities in anticipation of buying them back for a profit when their prices fall.

“This move has been more significant than other years,” Williams said in an interview yesterday. “There’s opportunity to do more things in Asia, whether long or short.”

The MSCI Asia-Pacific Index (MXAP) has gained more than 9 percent since the end of October as the U.S. moved toward a compromise on the so-called fiscal cliff, which referred to the risk of a government default from fiscal negotiation over more than $600 billion in spending cuts and tax increases, and the European debt crisis eased, while economic outlooks for Japan and China improved along with prospects of corporate earnings growth. Rebounding markets also helped revive fundraising, Williams said.

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