China banks outperform broader market after news of shareholding rule changes

SHANGHAI/BEIJING, March 27 (Reuters) - China's banking stocks outperformed the broader market on Friday after news that Beijing is considering easing shareholder restrictions to broaden capital-raising options for lenders.

China's banking regulator is weighing allowing some bank shareholders to become major investors - defined as holding a 5% stake or more - in one to two additional banks, on top of an upper limit of two currently, sources told Reuters on Thursday.

The banking regulator did not respond to Reuters requests on Thursday for comment on any potential rules changes.

China's CSI Banks Index .CSI399986 fell 0.3% at open, and was roughly flat in early trading. The benchmark CSI300 Index .CSI300 opened 1% lower.

The potential relaxation "has a positive impact on China banks," Citi said in a note to clients.

It would help accelerate banks' loan growth, drive management incentives to boost earnings and share price, and prod incremental buying from institutional investors including insurers, Citi said.

The move "could broaden the investor base for China banks, and would thus be positive for the sector in general," JPMorgan said in a report.