Key Takeaways:
The Hang Seng Index fell 1.6% to 23,038, breaching 23,000 for the first time in a year after a tax evasion scandal at Bank of China triggered a broad selloff in mainland lenders.
The National Audit Office disclosed that between April 2023 and August 2025, Bank of China used two subsidiary financial institutions and large numbers of its employees to package 11 private equity funds as public fund products, evading RMB 2.367 billion in taxes by exploiting the income tax exemption policy for public funds.
Bank of China shares slumped as much as 7% to HKD 4.90, a near three-month low, before settling at HKD 5.00, down 5.12%. Turnover surged to HKD 2.14 billion. Other major mainland banks declined across the board: China Construction Bank (00939.HK) fell 2.1%, Industrial and Commercial Bank of China (01398.HK) dropped 2.5%, and Agricultural Bank of China (01288.HK) lost 3.4%. CITIC Bank (00998.HK), China Merchants Bank (03968.HK), Bank of Communications (03328.HK) and Postal Savings Bank of China (01658.HK) each fell 2% to 3.4%.
The scandal raises governance concerns across China's state-owned banking sector, which could invite further regulatory probes and potential fines. The HSI touched an intraday low of 22,992 before paring losses, marking its weakest level since mid-2025. Total turnover reached HKD 233.3 billion as investors rotated out of financials. The selloff in Hong Kong tracked weakness in mainland A-shares, where the Shanghai Composite Index fell 0.8%, while the offshore yuan weakened past 7.25 per dollar. The Hong Kong dollar edged toward the weak end of its 7.75-to-7.85 trading band, with one-year implied volatility dropping to its lowest since January 2022, reflecting subdued demand for the greenback in the city.
This article is for informational purposes only and does not constitute investment advice.
