When banks that are normally perceived as cash warehouses are caught in a credit crunch and there appears to be dim hope for an injection to quell the thirst for capital, it is hard for the market not to panic.
Thus, it seems natural that bank stocks fell out of favor with China’s investors last Monday after the People’s Bank of China (PBC), the country’s central bank, published a hands-off response to the recent liquidity squeeze. Its warning letter railed against rapid credit expansion sowing trouble in the financial sector, although the PBC’s urging of large banks to play their part helped interbank borrowing costs fall.
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