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Alternative Market Briefing

Hedge funds’ short bets on Australian banks signal trouble ahead

Monday, May 23, 2016

Komfie Manalo, Opalesque Asia:

Hedge funds are shorting the biggest banks in Australia, signaling there is trouble brewing in one of the most profitable banking sectors in the world, reported The Australian.

Data has shown that short bets against the four largest Australian banks, including Commonwealth Bank, ANZ, Westpac and National Australia Bank, have jumped 50% this year, totaling $9bn on fears that rising bad debts, declining earnings and concern of a falling property market which have triggered worry amongst investors.

The number of shorts against Australia’s largest lenders is the highest on record to day since regulators started to compile data six years ago. Ironically, Australian banks have traditionally been favorite amongst investors because of their huge profitability.

Jonathan Tepper, head of a U.S.-based hedge fund consultancy firm Variant Perception, was quoted as saying, "We witnessed a mania in all its crazy excess." He has recommended the shorting of Australian banks in anticipation of a major property meltdown in the region.

Tepper has partnered with Australian asset manager John Hempton early this year to conduct covert investigation of the Australian property market. The duo drove around Sydney, from the glitzy beachside suburbs to shabby......................

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