Investors have mixed attitudes towards China's big banks - they either love 'em or hate 'em. Critics regard them as policy-arms of the state with questionable bad-loan accounting. However, supporters focus on the banks' consistently strong and good-quality profits. China Construction Bank and ICBC have both produced, and are producing, an ROE of more than 20% - Australia's big four banks, which are market darlings down under, managed only 15%. However, it appears that trust matters more than a good record when the future looks rocky. China's banks are trading at just above their book values - half their valuation of three years ago. This suggests that investors are willing to take the banks' word for it on asset values but allow no premium for emerging market-like growth. Until there is greater disclosure with Chinese banks, there will continue to be disparity between their operating performance and market perceptions. (VIEW LINK)
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