(Bloomberg) -- A key Chinese stock gauge neared a closely watched threshold as concerns deepened over the state of the nation’s financial sector.
The Shanghai Composite Index pared losses to 0.3%, closing just above the key support level of 2,800. The gauge fell below the threshold intraday. Banks led the declines, with Agricultural Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. falling more than 3% each.
Financial shares have been a bright spot in China’s equity rout this year thanks to state support and near record-low bond yields. A sub-gauge of lenders among CSI 300 firms have gained 3.8% in 2024 compared to declines in the benchmark.
“The selloff could have been triggered by disappointment toward first half results, in which five out of six state banks reported profit declines,” said Francis Chan, an analyst at Bloomberg Intelligence. “Some investors could also be taking profits, after the sector outperformed the broad market so far this year.”
The Shanghai gauge — dominated by state-owned enterprises — is now hovering at the lowest level since February as worries grow that efforts by regulators to stem a property-led slowdown is falling flat. Plans to allow homeowners to refinance as much as $5.4 trillion of mortgages to lower borrowing costs would also hurt profitability at state-run Chinese banks.
As financial shares fell, trading of bearish options surged. Put volume climbed to more than double the 20-day average on the Hong Kong-traded stocks of firms including Agricultural Bank, ICBC and Bank of China Ltd. Put trades on Postal Savings Bank of China Co. reached an almost two-year high.
--With assistance from Cecile Vannucci.
(Updates with closing prices throughout and options details in last paragraph)
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