China stock market

Shares in small Chinese banks surge on prospect of increased foreign ownership

The government’s decision to lift limits on foreign stakes in Chinese banks sparks investor interest

PUBLISHED : Monday, 13 November, 2017, 2:19pm
UPDATED : Monday, 13 November, 2017, 2:38pm

Jiangsu Wujiang Rural Commercial Bank led gains among smaller Chinese mainland-listed lenders on Monday on expectations they will be targeted by overseas investors following the government’s announcement that it would remove limits on foreign ownership of financial firms.

Shares of Wujiang Bank surged by the 10 per cent daily limit to 10.63 yuan in Shanghai. Ping An Bank jumped 5.8 per cent to 13.01 yuan in Shenzhen trading and Wuxi Rural Commercial Bank climbed 5.4 per cent to 8.83 yuan.

China announced the relaxation of the limits, which would allow overseas investors to become majority owners in Chinese brokerage and insurance firms, during US President Donald Trump’s recently concluded three-day state visit. No specific date was given for the change, with the government saying only that it would be soon.

The move signals China’s further opening of its capital market and will boost foreign institutions’ say in asset allocations by reinforcing the mentality of value investing, or buying companies whose share prices are lower than intrinsic values, according to Li Lifeng, a strategist at Sinolink Securities.

But Xiao Feifei and Ran Yuhang, analysts at Citic Securities, noted that while there was a chance foreign investors could become the biggest shareholders in small or medium-size banks, for big banks they were only likely to be able to raise their stakes, not become majority holders.

Big state-owned banks trailed their smaller rivals in stock performances. Industrial and Commercial Bank of China, the nation’s biggest by assets, added 2.4 per cent to 5.96 yuan in Shanghai, while Agricultural Bank of China rose 0.3 per cent and Bank of China was unchanged.