HK Stock Market Move | State-owned bank stocks continue to decline, with the market reacting strongly to the Audit Office report. UBS suggests that the financial impact on state-owned banks is limited.

Domestic bank stocks continued to decline. As of the time of writing, Agricultural Bank of China (01288) fell by 4.11% to HK$5.13; Industrial and Commercial Bank of China (01398) fell by 3.93% to HK$6.36; BANKCOMM (03328) fell by 3.76% to HK$6.65; China Construction Bank Corporation (00939) fell by 2.91% to HK$8. On the news front, the latest report from UBS stated that the market had a strong reaction to the audit report, but the bank believes the financial impact on domestic banks is limited. The bank views this market adjustment as a temporary setback driven by emotions rather than a fundamental change in the domestic banks. Considering the improvement in the fundamentals of large banks and in the absence of broader investigations or significant debt risks, the decline in stock prices may provide investors with opportunities to buy. Guotai Haitong also mentioned that the outflow of funds from the Shanghai and Shenzhen 300 ETF has increased recently, with an average daily outflow of nearly 20 billion yuan this week, reaching the second-highest level since the end of January in the past 26 years. If market volatility increases in the future and fund risk preferences rebalance, the pressure of net outflows from broad-based funds may gradually ease. The disturbance in the capital market of the banking sector is weakening marginally, and pricing in the future is expected to gradually return to fundamentals and dividend stability.