Australian banks share price rally was largely underpinned by offshore investor buying with local retail investors cashing out, according to Macquarie analysts.
Foreign investors increased their positions in each of the four largest banks — CBA, NAB, Westpac and ANZ, with ANZ experiencing the largest inflow of offshore capital, the analysts said. Retail investors were net sellers in the last three months of 2016 for the second quarter in a row. Such investors appeared to maintain their strategy of “buying the dip and selling the rally,” Macquarie said.
The four largest Australian banks make up more than a fourth of the benchmark share index, and are coveted for their dividend yields, high credit rating and domination of the Australian financial landscape. However, offshore investors are also paying close attention to concerns about the level of exposure to the nation’s housing market amid fears of a bubble.
This chart shows foreign bids for the largest bank shares
And this one depicts retail investors exiting positions
Macquarie also said short interest, a gauge of investor bearishness, in the major banks continued to decline at the end of 2016 and currently was at 1.1% or $5.4 billion. This is down from $6.6bn at the end of September and significantly lower than $9.4 billion peak in May 2016 reporting, the analysts said.
Current level of short interest is broadly in line with the five year average of 1%, Macquarie said.