This is what Bank of America Merrill Lynch chief global equities strategist Michael Hartnett told an investment conference last week:
“I should warn you I was in London last week and one of the bigger questions I got was ‘why the hell are the Australian banks performing so well?’”.
“There are a number of hedge funds that are short the Australian banks right now, trying to play on that demise of the emerging markets.”
According to an article in the Australian Financial Review, a number of investors think Australia’s banks — whose shares have reached record highs — are too expensive, and are heading for an inevitable correction.
When there are economic concerns about emerging markets, institutional investors have been switching their allocations towards Australia, which is seen as a safe haven.
Investors who were looking for high dividends bought Australian banks. This has been viewed as a good way to replace low-yielding investments in other sectors and regions.
While emerging markets are on the cusp of a turnaround, the big players from overseas piling into them has possibly helped to push their shares up.
The Big Four have risen to record highs recently. And banks make up around 30% of the ASX200.
That index has risen 32% over the past 12 months. And some investors are worried the banks’ share prices are reaching bubble territory, and are due for a correction.
There’s more at the AFR.