Monday, 16 September 2013

Taper victims

Chances are if you've been looking at the news recently you may have heard something about the likely slowing of bond purchases by the US Federal Reserve.  Referred to as the "Taper", financial commentators have been speculating as to what will be the likely impacts, progression and victims of the US central bank changing the course of markets as it removes the support of its bond buying program which has been providing liquidity to global markets since the financial crash (now 5 years old).

Hedge fund managers have been looking for likely victims however and Australian banks fit the bill (even without the Taper they remain overvalued relative to the domestic Australian economy and their overseas operations, but why deny the hedge funds their fun?!).  As the Australian Financial Review has noted:
Foreign hedge funds are ­betting Australia’s banks will suffer big share price falls as a slowdown in emerging markets spreads here....Major banks’ shares have surged this year to record highs, prompting several investors and analysts to speculate they are in bubble territory.
International fund managers and Australian companies attending an investment conference in New York last week were told that some big hedge funds were convinced the major banks were overvalued and would inevitably fall to more normal levels....“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?’” Bank of America Merrill Lynch chief global equities strategist Michael Hartnett told his bank’s conference.
Global investors are bracing this week for a meeting of the US Federal Reserve, which may decide to modestly or aggressively scale back the $US85 billion-a-month bond purchases known as quantitative easing that have driven up share prices around the world. (here)

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