China Banks: Let Shares Prices Speak For Themselves18 July, 2011, 14:39. Posted by Zarathustra
Tags: Bank of China, Bank of Communication, Banking, China Construction Bank, Industrial and Commercial Bank of China, JPMorgan
Forget what has been said on the health of Chinese banks around.
Chinese banking shares have lost their glories after the financial crisis. Well that’s a bit of an exaggeration of course, as we have dead banks and near-dead banks in the West of which their shares prices have dropped from somewhere between 99% to 100%, while Chinese banking shares have been holding up relatively well if you compare them to the worst of the West.
But let’s face it, it doesn’t stop them losing their glory. After the lending spree, they have been forced by regulators to raise capital to cushion the shock. Yet it is unclear how things will turn out in the future, and we are already seeing some local governments running into difficulties. Growth story, no more.
Let’s allow the share prices speak for themselves. Those traded in Shanghai A-share market are, let’s face it, doing rather badly. In fact, Bank of China is now only some 5% above its all time low after the financial crisis.
Ironically, if you hold these banks in the Shanghai market since early 2007 (Bank of China and ICBC), you are no better off than holding JPMorgan even taking currency appreciation into account.
And even more ironically, if you hold these banks in the Shanghai market (now add CCB and BoComm) since the Chinese banking shares peak in November 2007, you are way worse off than holding JPMorgan.