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But in the Chinese mainland, where the state-controlled press ran headlines touting the minimal risks faced by two of the country's biggest banks from the U.S. credit crunch, Bank of China's shares rose Friday.
Bank of China's Shanghai-traded shares gained 1 percent to 6.16 yuan. Its Hong Kong shares fell 5.4 percent to 3.87 Hong Kong dollars, despite stronger than expected first-half earnings.
As the most international of China's four big banks, with a quarter of its earnings from overseas business, Bank of China is likely to have the largest exposure to subprime mortgage-backed securities and CDOS.
Subprime refers to people with risky credit. Those two kinds of securities have lost value recently because of rising mortgage defaults.
Bank of China's Hong Kong unit, BOC Hong Kong (Holdings) reported it had $1.6 billion in subprime-linked securities, making up 1.2 percent of its total assets.
The parent bank said it has seen no defaults on any of its subprime-linked securities. However, it took impairment charges for potential losses amounting to 1.15 billion yuan ($151 million) in its earnings report Thursday.
Since the asset-backed securities all had ratings of "A" or above, though, analysts say they see little risk to the bank from the credit crisis.
Bank of China denied a report earlier this month by a Chinese financial magazine, Capital Week, that it risks losses of 3.85 billion yuan ($509 million).
The magazine, citing accounting estimates, put potential losses for six major Chinese lenders from subprime-related securities at 4.9 billion yuan ($647 million).
China's biggest lender, Industrial & Commercial Bank of China, said Thursday that its subprime mortgage-backed securities were valued at $1.23 billion at the end of June, accounting for only 0.3 percent of its total securities investment.
"ICBC did have a loss from the investment if calculated at the current market value of the securities," Xinhua quoted Yang Kaisheng, the bank's president, as saying. "But the loss is not significant and well within ICBC's capacity to bear," Yang said.
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 Up to now 2007 has been a banner year for China's big banks.
ICBC said its first-half net profit rose 62 percent from a year earlier to 41 billion yuan ($5.4 billion), boosted by higher interest income and an expansion of its fee-based businesses.
Bank of China's net profit for January-June rose 52 percent to 29.5 billion yuan ($3.9 billion).
China Construction Bank, another of the big state lenders, is due to report earnings over the weekend.
Chinese banks and other financial institutions have less exposure to international market trends and so far, the country's own stock markets have shrugged off worries over the U.S. credit crisis.
In a report released Friday, ratings agency Standard & Poor's said Asian economies would be able to weather the turmoil in global stock and credit markets without "major reversals."
"Asian economies have improved their banking systems, reined in fiscal deficits, brought down external debts, built up foreign exchange reserves and improved their current account balances," credit analyst Ping Chew said in a statement.
However Chew noted increasing vulnerability for some central banks because lower quality borrowers have migrated to the region in search of high returns.
For China and most of Asia, the greater worry is that problems may spill into the broader world economy, sapping demand for imports and stunting global growth.
So far, though, China's markets remain bullish.
The benchmark Shanghai Composite Index topped 5,000 for the first time on Thursday. Friday it gained 75.18 points, or 1.5 percent, to a record close of 5,107.67.
[Associated Press;
By ELAINE KURTENBACH]
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