Citi has told clients that sharp falls in HSBC Holdings PLC (LSE:HSBA) and Standard Chartered PLC (LSE:STAN) shares appear excessive following a media report that some banks have suspended opening Hong Kong accounts for mainland Chinese customers.
The pair were among a group of stocks, including Prudential and AIA that fell 5-8% on Thursday after the South China Morning Post reported on the account suspensions, a story subsequently picked up by Bloomberg.
The move follows an edict issued on 22 May by China's watchdog, the China Securities Regulatory Commission, targeting unauthorised cross-border brokerage activity by offshore institutions.
Hong Kong's own regulators have moved in parallel, with the Securities and Futures Commission issuing a circular to brokers and the Hong Kong Monetary Authority writing to banks asking them to review existing accounts held by mainland customers.
Citi said the sell-off appears overdone and flagged that it would elaborate on the potential implications and financial sensitivities for both HSBC and Standard Chartered.
The two London-listed banks have significant exposure to Hong Kong and mainland China, making them particularly sensitive to any tightening of cross-border financial activity between the two markets.
Whether the regulatory intervention represents a narrow technical crackdown on brokerage services or signals a broader tightening of mainland access to offshore financial products is likely to be the key question for investors in the coming days.
