DOMESTICALLY listed shares in China’s big five banks jumped yesterday but later pared gains, after the country issued draft regulations to introduce a bank deposit insurance program for the first time.

    Offshore investors also reacted cautiously to the news, with the banks’ Hong Kong listed shares falling.

    Industrial and Commercial Bank of China Ltd., the country’s largest lender, rose 2.97 percent in morning trading in Shanghai, before easing to trade flat yesterday afternoon to close down 0.74 percent, while Agricultural Bank of China Ltd. retreated from a high up 3.86 percent to drop 1.05 percent.

    China Construction Bank Corp. held on to gains and closed the day up 1.91 percent after rising 5.32 percent in the morning session. Bank of Communications Co., the country’s fifth-largest lender, was up 1.50 percent after jumping 8.61 percent in the morning.

    The move Sunday was the latest in a series of steps to liberalize interest rates and allow banks to compete on a fully commercial basis.

    While mainland investors continue to pour more money into banking shares, Hong Kong traders are wary that the mainland rally is getting overbought.

    That has caused an index measuring price differences between dual listed shares in Hong Kong and Shanghai to hit its highest level since July 2013, as the two markets continue to diverge in terms of valuations.

    China’s banking shares rallied massively Friday, with the index of major Chinese banks gaining more than 8 percent in a single day.

    “The announcement of deposit insurance system has some positive impacts on the bank shares today,” said Zhang Yanbing, analyst at Zheshang Securities in Shanghai. (SD-Agencies)