Prudential PLC (LSE:PRU) shares plunged 11.6% to 967.9p after reports that Chinese authorities had begun taxing returns from offshore insurance policies, threatening demand from mainland customers.
The sell-off spread to other Asia-focused FTSE 100 companies, with HSBC Holdings PLC (LSE:HSBA, NYSE:HSBC) and Standard Chartered PLC (LSE:STAN) both dropping over 6%.
Their combined weight pushed London's blue-chip index into negative territory.
Mainland Chinese tax officials had started levying personal income tax on returns generated by insurance policies held offshore, according to a report on Caixin Global, closing a longstanding regulatory loophole as international financial-data sharing improves.
Early enforcement cases in Beijing and Hangzhou involved a 20% tax on returns from policies sold in Hong Kong, according to tax lawyers and insurance industry sources cited on the online publication.
The reported levies cover dividend payments and interest earned on prepaid premiums. This could reduce the attraction of Hong Kong insurance products for wealthy mainland Chinese customers, who have traditionally used them for investment, savings and financial diversification.
Prudential is particularly exposed because Hong Kong and mainland China are important sources of new insurance business for the group.
The declines in HSBC and Standard Chartered reflected broader concern about tighter scrutiny of offshore wealth and investment flows. Both banks generate a substantial proportion of their earnings in Hong Kong and other Asian markets, although the direct financial effect of the reported insurance tax remains unclear.
