Shares of Chinese banks listed in Hong Kong continued their downward trajectory. At the time of writing, Agricultural Bank of China Ltd (HKEX: 01288) fell 4.11% to HK$5.13. Industrial and Commercial Bank of China Ltd (HKEX: 01398) declined 3.93% to HK$6.36. Bank of Communications Co Ltd (HKEX: 03328) dropped 3.76% to HK$6.65. China Construction Bank Corp (HKEX: 00939) was down 2.91% to HK$8.

The market's sharp reaction follows a recent report from the National Audit Office. However, a UBS research note suggests the financial impact on these banks is likely limited. The bank views the current market adjustment as a sentiment-driven, temporary setback rather than a fundamental change in the banks' core operations. Given that the fundamentals of major banks are improving, and in the absence of a broader investigation or more significant liability risks, the share price decline could present a buying opportunity for investors.

Separately, analysis from Guotai Junan Securities indicates that the pace of outflows from broad-based ETFs like those tracking the CSI 300 Index has accelerated recently. The average daily outflow this week approached 20 billion yuan, with the weekly outflow reaching a level not seen since late January, marking one of the highest points in the past 26 years. If market volatility increases and capital risk preferences rebalance, the pressure from net outflows of broad-based funds may ease marginally. For the banking sector, the disturbance to capital flows is weakening at the margin, and future pricing is expected to gradually realign with fundamental performance and dividend stability.