Shares in major Asia-focused financial institutions plunged on Thursday following a report that some Hong Kong banks have been suspending the opening of savings and investment accounts for mainland Chinese clients intended for overseas investment purposes.
In London trading, HSBC shares fell by more than 5%. Standard Chartered slid as much as 7%, while life insurers AIA Group and Prudential posted deep losses - AIA down 6.8% in its largest single-day drop since March, and Prudential off by more than 8%.
The moves came after a report said the Shanghai branch of Bank of East Asia had halted the opening of such accounts. The article also cited HSBC, reporting the bank had warned that funds deposited into investment accounts must meet Hong Kongs regulatory requirements.
Market participants interpreted the suspensions and warnings as part of a broader tightening by Hong Kong banks of scrutiny over mainland Chinese clients seeking to open savings and investment accounts. The measures are said to be occurring against the backdrop of Beijings campaign to curb illegal cross-border capital flows.
Regulatory enforcement was highlighted by a recent action in which Chinas securities regulator imposed combined fines exceeding $330 million on three online brokers for operating on the mainland without a license. That enforcement action is part of the context cited in connection with the increased account checks.
The selloff did not remain confined to lenders. Insurers were pulled lower as well amid expectations that tighter controls on account openings and capital flows could dampen the business of companies that rely heavily on mainland Chinese visitors traveling to Hong Kong to buy insurance products.
Analysts and market participants noted the direct link between reduced access for mainland customers and potential near-term revenue pressure for firms that generate significant sales from cross-border buyers in Hong Kong. The initial market reaction reflected investor concern about the immediate implications for deposit flows, investment account activity and sales of insurance policies to visiting mainland clients.
At this stage, the developments reported involve specific banks and represent a heightened level of scrutiny rather than a confirmed, uniform policy applied across all institutions. Markets will likely watch for further clarifications from banks and regulators to assess how persistent and widespread these account restrictions become.