AUSTRALIA'S biggest banks have become the victims of aggressive international hedge funds, which are shorting the banks' stocks after growing concern about the strength of the domestic property market.
The top four banks have suffered a sustained selldown since April, as the US funds slash their exposure to the local financial services sector.
Westpac has experienced the most savage declines, with its share price down 19.4 per cent since early April, ahead of NAB's 15.5 per cent decline, CBA's 13.97 per cent fall and ANZ's 12.82 per cent depreciation.
The sell-off of the banks, combined with the negative sentiment towards the Australian mining industry because of the government's super-profits tax, has pushed the S&P/ASX200 down at least 8 per cent in the past month.
A New York hedge fund manager, who did not want to be named, said sentiment towards the Australian banks had soured because of doubts that the strength in the national property market would be sustained.
"There's a lot of scepticism in the US regarding the Australian property market," the hedge fund manager said.
"A lot of people have doubts about whether the strength of the market is going to be maintained.
"I think it's the case funds are shorting the banks. If you're of the view that property is going to come off, then shorting the stocks is a very clean way to express that view. It's an attractive trade."
Australian property prices have remained resilient, as capital city property prices rose 4.4 per cent in the first quarter of the year. However, new figures published by RP Data-Rismark this week show a weak 0.3 per cent increase in April. Economists were also surprised this week when new building commitments plunged by 14.8 per cent in April, outstripping the market's consensus for a 5 per cent decline.
The big four banks in Australia confirmed there had been an increase in the level of international trading in their stocks but downplayed the property connections.
The fall of the Australian dollar was thought to have prompted some of the overseas selling.
The banks' share prices have been under pressure since the recent reporting season in late April, when the chief executives warned of slowing earnings growth in the next 12 months.
The cash earnings of the majors rose, but there was pressure in individual businesses at each of the banks.
Westpac's Gail Kelly surprised the market when she said earnings growth would be difficult to maintain in the second half of the financial year.
Westpac is thought to have been targeted most heavily by hedge funds because of its large residential mortgage book, which has grown rapidly over the past two years.
CBA is understood to be least exposed to hedge fund investors compared with its three major rivals, primarily because of its large retail investor base.
However, several US long-only funds are thought to have sold out of the bank recently.
