Shares in China’s privately run banks have fallen sharply this year, as the country’s property slowdown starts to bite
—have done much better in the stock market this year, bucking a long-term trend. They have fallen by an average of 4.9% since the start of the year, versus a 17% decline for the CSI 300 index of the largest stocks listed in Shanghai or Shenzhen.
But another key reason is that as China’s economy struggles, state-owned banks can find more alternatives to offering loans to developers. They can shift their lending from mortgages to big infrastructure loans, which private commercial banks will find hard to follow, said Vincent Chan, a China strategist at Aletheia Capital.
At the end of 2021, China Merchants Bank and Ping An Bank were trading at forward price-to-book ratios of 1.49 and 0.88, respectively. Those numbers had fallen to around 0.92 and 0.61 by Aug. 26, according to FactSet. That is still a substantial premium to the big four, which are all trading at below 0.50.florence lo/Reuters
Joint-stock banks in China are run with a more widespread shareholding structure than the state-owned banks. The term includes privately-run lenders such as China Merchants Bank and Ping An Bank but also includes other institutions where the government holds a controlling interest.
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