Five non exec directors of Royal Bank of Scotland (RBS) last week bought shares at between 403p and 423p. They increased their shareholdings by a significant amount, by between 25 and 150%, and put in between £40k and £495k of their own money.

For a bank which is supposedly sitting on possible losses of several billion pounds this is certainly interesting behaviour. It also signals to me that the market has oversold RBS in anticipation of the disclosure of these losses.

The top for RBS was signalled in March by Finance Director Whittaker, who sold almost £500k of shares in his employer at prices almost 75% higher than today.  I believe last Thursday and Fridays purchases signal a buying opportunity.

If I look at the sector overall, I find the biggest director buying in Barclays (£600k) and RBS (£2.2m) over the last 30 days. Selling has been in HSBC (Non exec Hughes Hallett almost £1m) and Standard Chartered (Chairman Davies £1.5m) both in mid October. Bothy these stocks rank amongst the best performers of the month, down only 11% and 2% over the last thirty days, while RBS and Barclays rank amongst the worst performers, bar Northern Rock, down 28% and 27% over the same period.

If I were a betting man, I’d switch out of STAN and HSBC into BARC and RBS ahead of write down disclosures below what the market now anticipates. And I’d also be looking for more news about something potentially much more serious, contagion of a US and European slowdown to Asian economies.