China banks’ stealth meltdown

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This article by Shuli Ren for Bloomberg crossed my desk and may be of interest to some clients. Here is a part of the article: China’s banks are in trouble again. With global markets in turmoil, the sell-off on the mainland has not generated as many headlines. That should not be the case. In just four days, banks on the CSI 300 Index tumbled on average almost 11 percent, erasing the benchmark’s entire gain this year.

In part, it is because lenders were rallying too fast, as I warned last month. But traders are also blaming local media reports that say the China Banking Regulatory Commission will make cutting consumer debt a top policy consideration this year. That news alone can sink bank stocks. Since Guo Shuqing took over as chairman of the CBRC 12 months ago, he has made reining in the sale of wealth-management products, a huge money-spinner for banks a priority. Financial institutions fell in line quickly, as evidenced by the decline in investment receivables.

In just six months, China CITIC Bank Corp. culled its investment receivables by almost half to 585 billion yuan ($92 billion) as of Sept. 30. That figure must be even smaller now after Beijing fired another warning shot in November. It is a similar picture at other mid-sized lenders such as China Everbright Bank Co. and China Minsheng Banking Corp...
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You can read the full article HERE.

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