China Banks Shunned as Investors Eye 2003 Low in Credit Bust

The cheapest Chinese bank stocks since 2004 may drop further as the three-year credit boom that created the world’s most profitable lenders shows signs of turning into a bust.

The MSCI China Financials Index sank 24 percent this month, falling more than benchmark bank gauges for Europe, the U.S., Japan and emerging markets. Valuations in China dropped below levels reached during the global financial crisis for the first time last week, even after Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. said first-half profits hit a record and analysts raised forecasts for next year.