US banks lose confidence in China’s banks. The Bank of America has sold all of its China Construction Bank shares, worth up to US$1.5 billion, they announced recently. A Wall Street Journal analysis suggests the U.S. banking sector no longer expects to benefit from investing in Chinese banks.
Bank of America sold 2 billion shares on the Hong Kong market for US$0.74 each, according to The Wall Street Journal. Including this sell-out, Bank of America’s profit from its shares has amounted to nearly $14 billion since 2009.
Just four months ago, Goldman Sachs, another leading investment bank, sold out all its shares previously held in the Industrial and Commercial Bank of China (ICBC).
International financial media have pointed out that Chinese banks have been injecting capital into the local markets in the past few years due to central government policy, and have thus created a high level of potential bad debts that are hard to value due to the lack of transparency in the Chinese banking system. This potential danger has triggered the liquidation of holdings in Chinese banks by the Wall Street heavy hitters.
During the past 10 years, many on Wall Street expected large profits from investment in Chinese banks, yet today, they have officially reversed their position. Bank of America, one of the largest U.S. banks, was the last one to withdraw, marking the end of an era in favoring investment in Chinese banks.
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