Chinese banks’ shares sink after Beijing reportedly tells them to control profit to support economy
- Regulator tells lenders to increase funding to small businesses and not to ‘let the profits shoot too high’, according to the Securities Times
Plummeting shares in Chinese banks dragged down stock markets on Friday morning, after the central government reportedly ordered lenders to “control profit growth” and increase funding support for small and private businesses amid a worsening economic slowdown.
In Hong Kong, all Chinese lenders were in the red at the lunch break, with smaller ones sinking the most. Bank of Qingdao plunged 8.7 per cent, Bank of Jinzhou slid 7.2 per cent and Jiangxi Bank was off by 6.9 per cent.
On the Shanghai stock exchange, ICBC, the country’s largest lender, declined 1.9 per cent to 5.13 yuan, leaving it poised to hit the lowest level in nearly six months.
China Construction Bank, the second biggest bank by market cap, lost 2.3 per cent to 6.25 yuan, also the worst level since early July. China Merchants Bank dropped 2.1 per cent to 25.37 yuan.
The three stocks alone contributed 5 points, or 20 per cent, to total losses on the Shanghai Composite Index on Friday morning. The Shanghai Composite Index traded 1 per cent lower at 2,510.98 at the mid-session break.
China’s banking regulators recently delivered a verbal message – a practice known as window guidance in Chinese – to banks telling them they should exercise “moderate control” of profit growth and not to “let the figures shoot too high” for 2018, according to the Securities Times, a newspaper run by the People’s Daily, on Thursday.