A startling event recently unfolded in the Hong Kong stock market involving a small-cap stock. On February 5th, WEIHAI BANK (09677.HK) experienced a dramatic single-day plunge of 26.54%, closing at HKD 1.91, its lowest level since its listing in 2020. Remarkably, this sharp decline, which erased over HKD 4.1 billion in market capitalization, was accompanied by a trading volume of only 556,000 shares, with a total transaction value of just HKD 1.1446 million.
As a leading regional commercial bank based in Weihai, Shandong, WEIHAI BANK's initial listing in Hong Kong was met with high expectations at an issue price of HKD 3.35 per share. However, its share price has now nearly halved, rendering it a victim of poor liquidity among small and mid-cap Chinese bank stocks in Hong Kong.
Reviewing WEIHAI BANK's performance reveals a persistent downtrend since its October 2020 debut. After its first trading day saw prices hovering near the IPO price, the stock entered a prolonged period of decline. Notably, from late November 2022 to early March 2023, the stock recorded zero transactions for 62 consecutive trading days, becoming a prime example of a "zombie stock" in the Hong Kong market.
Over a longer horizon, the bearish trend is even more pronounced. In the past three months, the share price fell from a high of HKD 3.06 to a low of HKD 1.85, a cumulative drop of 32.54%. Over the past year, the decline exceeds 30%, significantly underperforming the broader Hong Kong bank sector.
This sharp drop occurred without any major negative announcements from the company regarding its performance, increased regulatory penalties, significant shareholder减持, or operational crises. The only recent negative development was a fine of CNY 350,000 imposed on January 7th, 2026, by the Weifang branch of the National Financial Regulatory Administration on the bank's Weifang branch for "issuing loans without actual purpose and inflating deposit and loan scales." However, this penalty was relatively minor and occurred a month prior to the price crash, making it an unlikely direct cause for the single-day暴跌.
As a barometer of fundamental health, the stock price reflects pressures on the bank's core operational metrics. While WEIHAI BANK's asset scale has shown steady growth, expanding from CNY 391.877 billion at the end of 2023 to CNY 441.464 billion by the end of 2024—a 12.65% year-on-year increase—the pace accelerated in 2025. By the end of September 2025, total assets reached CNY 502.823 billion, up 13.9% from the end of 2024.
Beyond extreme market sentiment, WEIHAI BANK's fundamentals are not entirely bleak. After hitting a low in growth rates during 2023, both revenue and net profit showed signs of stabilization and recovery from 2024 into the first half of 2025. In H1 2025, operating revenue increased by 10.98% year-on-year, and net profit attributable to shareholders rose by 4.94%, a respectable performance amid broader pressures on the banking sector.
However, the significant growth in H1 2025 was largely driven by interest income from credit expansion, while the contribution from intermediary business income remained low, indicating a relatively singular profit structure. A core challenge for profitability is the持续narrowing net interest margin (NIM), which fell from 2.07% at the end of 2022 to 1.77% by the end of 2024, and further contracted to 1.65% by the end of H1 2025, directly eroding profit margins.
In recent years, the bank's真正的软肋has been its capital adequacy ratio. Despite asset growth, its capital adequacy ratios have been on a downward trend, highlighting increasing pressure for capital replenishment. Public data shows that as of June 2025, WEIHAI BANK's core tier-1 capital adequacy ratio was 8.33%, its tier-1 capital ratio was 10.38%, and its total capital adequacy ratio was 13.21%, down by 0.98, 0.44, and 0.55 percentage points respectively from the end of 2024. By the end of Q3 2025, these ratios further declined to 8.02%, 10.04%, and 11.89% respectively. The core tier-1 ratio is now approaching the regulatory minimum of 7.5%, making capital replenishment urgent.
To alleviate capital pressure, WEIHAI BANK launched a private placement plan in July 2025, aiming to issue up to 912 million shares to three state-owned institutions—Shandong Hi-Speed Group, Jinlian Group, and Caixin Asset—to raise CNY 3 billion solely for supplementing core tier-1 capital. The subscription price was set at CNY 3.29 per share (approximately HKD 3.61). However, as of February 10th, 2026, WEIHAI BANK's H-share price was only HKD 2.09, more than 40% below the placement price, leaving the participating state-owned investors deeply underwater and reflecting market skepticism about the bank's prospects even after capital infusion.
WEIHAI BANK's暴跌is symptomatic of the broader cyclical pressures facing small and medium-sized banks since 2023, as the domestic banking sector entered a period of slowing profit growth and emerging risks. This environment has hit smaller banks particularly hard, contributing to the collective weakness of small and mid-cap Chinese bank stocks in Hong Kong.
WEIHAI BANK is not alone in suffering from scant liquidity. Data shows that since the start of 2026, the average daily trading volume for banks like Guangzhou Rural Commercial Bank (1551.HK), Jiujiang Bank (6190.HK), and Jinshang Bank (2558.HK) has been less than 50,000 shares. WEIHAI BANK itself had 136 trading days with zero volume from the beginning of 2025 to the present; Jiujiang Bank had 184 such days during the same period, including 16 consecutive days with no trades since the start of 2026; Jinshang Bank recorded 9 consecutive days with zero turnover recently.
This predicament stems from three main mismatches. First, a market structure mismatch: structural polarization in the Hong Kong market has intensified, with capital concentrating heavily in large-cap, high-liquidity blue-chip stocks, while small and mid-cap stocks like WEIHAI BANK and Jiujiang Bank are marginalized. As of February 10th, 2026, the top 10 Chinese bank stocks in Hong Kong by market cap are all large state-owned or joint-stock banks, whereas small and mid-cap peers like WEIHAI BANK have market caps below HKD 20 billion, struggling to attract investor attention.
Second, an investor structure mismatch: the Hong Kong market is institution-dominated, and these investors prioritize liquidity, reasonable valuation, and controllable risk. Small and mid-cap Chinese bank stocks generally suffer from illiquidity, low business transparency, high regional concentration, and significant risk exposures, making them unattractive for institutional allocation.
Third, low liquidity creates a vicious cycle that amplifies price volatility. WEIHAI BANK's illiquidity was starkly evident on February 5th, where a sell-off worth less than HKD 1.2 million triggered a 26% crash. This environment means even small sell orders can cause significant price drops, whose volatility, in turn, further deters investors, leading to even poorer liquidity—a self-reinforcing cycle of "low turnover, low attention, valuation discount, worse liquidity."
The performance of small and mid-cap Chinese bank stocks in Hong Kong in recent years has been dismal. Most trade below their IPO prices, with shares declining yearly and valuations compressed to historical lows. Data indicates that many Hong Kong-listed Chinese bank stocks, predominantly smaller banks, trade below their issue prices, with an破发rate exceeding 80%. For instance, WEIHAI BANK's current price of HKD 2.09 is 37.6% below its HKD 3.35 issue price; Bohai Bank (9668.HK) trades at HKD 0.92, over 70% below its HKD 4.80 IPO price; Guangzhou Rural Commercial Bank is at HKD 1.52, down over 65% from HKD 5.10; and Jiangxi Bank (1916.HK) trades at HKD 0.71, a drop of over 85% from its HKD 6.39 issue price.
Valuation-wise, these stocks are at historical lows, with price-to-book (P/B) ratios普遍below 0.5x, some even under 0.2x. As of February 10th, 2026, Harbin Bank (6138.HK) had a P/B of just 0.07x, Bank of Tianjin (1578.HK) 0.19x, and Guizhou Bank (6199.HK) 0.26x.
"Marginalization upon listing" seems the fate of many small Chinese banks in Hong Kong. Stocks like WEIHAI BANK, Jiujiang Bank, Jinshang Bank, and Yibin Bank (2596.HK) have gradually become "orphan stocks" post-IPO, lacking institutional coverage, research reports, and diverse investor bases. Data shows that most small and mid-cap Chinese bank stocks in Hong Kong received almost zero analyst reports throughout 2025.
WEIHAI BANK's暴跌represents just the "tip of the iceberg" regarding the liquidity crisis plaguing small Chinese bank stocks in Hong Kong. A short-term price recovery might be technically straightforward—the same minimal capital that caused the drop could theoretically lift the price. However, the real challenge lies in breaking the vicious cycle of "liquidity drought, low valuation, financing difficulties," and finding a sustainable path for value creation before capital adequacy ratios breach critical regulatory red lines.