Chinese banks surge as CSRC guideline urging more shareholder returns lifts confidence

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Chinese banks soar after regulator pushes for increased shareholder returns, aiming to enhance stock prices and corporate governance

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Shares of top banks, including ICBC, rose on Monday after the regulator pushed for increased shareholder returns. Photo: EPA-EFE

Zhang Shidongin Shanghai

Published: 5:30pm, 18 Nov 2024Updated: 7:34pm, 18 Nov 2024

Top Chinese banks rose after the mainland’s securities regulator urged listed companies to do more to bolster stock prices and improve shareholder returns.

An index of 42 banks listed on the Shanghai and Shenzhen exchanges gained more than 2 per cent on Monday, according to financial data provider Shanghai DZH. Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank, the biggest state-backed lenders, advanced at least 2.9 per cent in Hong Kong, outperforming the 0.8 per cent gain in the Hang Seng Index.

A guideline promulgated on Friday by the China Securities Regulatory Commission (CSRC) spurred banking stocks, a sector in which shares are languishing 50 per cent below book value on average. The move is part of the CSRC’s commitment to improving corporate governance and boosting shareholder returns after Wu Qing, a veteran regulator, was named in February to oversee the US$10 trillion stock market.

“The new rule on market capitalisation will reinforce expectations among investors about more stock buy-backs,” said Liu Xinqi, an analyst at Guotai Junan Securities in Shanghai.

A view of the China Securities Regulatory Commission’s offices in Beijing. Photo: Simon Song

Companies with price-to-book ratios of less than one for a prolonged duration are required to map out plans to reverse course and disclose rectification measures approved by the board, according to the CSRC’s guideline. These companies need to evaluate their plans every year and modify them as necessary, the regulator said. Companies are also required to devote a special section in their annual reports to explain how those plans will be implemented.