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Hedge fund manager Philip King shorts Commonwealth Bank of Australia

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Philip King, CIO at Regal Funds Management, has initiated a short position in the shares of Commonwealth Bank of Australia, pointing to what he describes as one of the world’s most expensive valuations, according to a report by Bloomberg. 

CBA currently trades at a forward price-earnings multiple of 22 times, making it the priciest bank on the MSCI World Bank Index. In comparison, JPMorgan Chase & Co trades at a multiple of 11.7. King forecasts a decline in CBA’s earnings-per-share in the coming years. 

Currently, CBA’s EPS is more than double that of its domestic competitors: National Australia Bank, Westpac Banking Corp and ANZ Group Holdings. 

In a Bloomberg interview in Sydney, King said: “Australian banks are now facing intense competition from all directions. 

“Buy now, pay later operators are capturing market share in consumer lending, non-bank lenders are gaining ground in business lending, and private credit is making inroads across the entire loan portfolio.” 

King added that stringent capital requirements are making Australian lenders “increasingly uncompetitive”. 

Regal Funds Management, which has grown from a four-person team in 2004 to around 145 employees, now manages about AUD12bn ($7.9bn) from offices in Sydney, Singapore and New York. The firm has expanded from a primarily long-short equities fund into an investment manager across private markets and alternatives. 

The Regal Long Short Australian Equity Fund has returned 25% over the past year, outperforming many of its peers, according to data compiled by Bloomberg.  

On the bullish side, King is backing Capstone Copper, citing its potential boost from the green energy transition and investments in artificial intelligence businesses. Capstone Copper, which focuses on the exploration and production of copper and silver in Canada, the US, Mexico and Chile, has remained relatively stable in Sydney trading since its listing earlier this year. 

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