Time to buy Hong Kong listed Chinese banks? High risk, high return (or loss)

Large Hong Kong listed Chinese banks are at their cheapest ever according to P/B, trailing P/E and dividend yield measures. In fact they are the cheapest large banks in the world. The large Chinese banks are priced as if China is moving in the direction of a financial crisis. Is this true, or have their pricing been killed by negative sentiment?

For example the largest of the lot Industrial and Commercial Bank of China (ICBC) is currently priced at 0.87x book value vs. approximately 1.35x for large banks globally. When it was listed in 2006 the bank was valued at 2.6x book. 

There is no doubt in my mind that, 1) Large Chinese banks are dirt cheap considering current pricing and potential growth, 2) there are significant risks involved. In my perception a bet on Chinese banks may be a good one, however I would not stack up my portfolio too much with this stuff either. 

Some major risks:

• Some believe China is moving into recession: Junheng Li (founder of Chinese focused research firm Warren Capital) stated that "China is headed into a recession, and the nation wasted USD 200 billion on its stock market stabilization efforts". He further believes that the coming Chinese crisis will drag the rest of the world down with it
• Chinese banks experience somewhat of a margin squeeze from lower interest rates
• Increase in none performing loans and illegal fundraising and frauds spreading to the banking system

Large Hong Kong listed Chinese Banks:

Source: Financial Times

Large US and UK banks: 

Source: Financial Times

Disclosure: I hold no positions in any of the above discussed companies.

I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. I have no business relationship with any company whose stock is mentioned in this article.