China Merchants Bank sinks by most in 11 years as damage to shareholders snowballs to US$35 billion in two days
- Stock extended decline after bank’s board voted 15-0 on Monday to remove Tian Huiyu as president and director without giving a reason
- Losses totalled US$35 billion over two days for unsuspecting shareholders following media reports of unspecified government probe
The stock tanked 11.5 per cent to HK$52.90 at the close of Tuesday trading in Hong Kong, slicing HK$124.6 billion (US$15.7 billion) from its market capitalisation as trading resumed in the city after a two-day holiday. Tuesday’s losses were the worst since a 12 per cent crash in October 2011, according to Bloomberg data.
“Judging from the stock price, liquidity and macroeconomic expectations and sudden events will all affect the short-term stock price trend,” Essence Securities said in a report on Tuesday. “Changes may lead to increased short-term fluctuations” but is likely to have only a small impact on the bank’s fundamentals, it added.
Such unexplained investigations and boardroom decisions have plagued several Chinese companies in the past, most notably in the aftermath of debt-funded spending spree of HNA Group and Anbang Insurance. They make the local stock market a hotbed for speculation about corruption scandals and political fallouts, while inflicting sudden losses on global investors.