August 25, 2007 (LPAC)--Two Chinese banks reported their exposure to the collapsing subprime mortgage market in the U.S. on Thursday and their stocks took a pummeling on the Hong Kong stock market as a result. The Bank of China reported that it was holding almost $9.7 billion in securities backed by subprime mortgages, or about 3.5 percent of its total securities holdings. Industrial and Commercial Bank of China reported it was hold $1.23 billion in such securities. A third Chinese bank, China Construction Bank will report its first half results on Monday.

Not surprisingly, banking experts are playing down the exposure of these Chinese banks. "We expect the losses are not going to be unbearable," Charlene Chu, a banking analyst with Fitch Ratings in Beijing told the New York Times. Investors are clearly rattled however, and these reported exposures likely tell only part of the story and may also lead to the flow of funds into the U.S. drying up.