China banks outperformed in October

Small banks were the big winners.

According to Bernstein's monthly market monitor, Chinese banks outperformed the market by 11% in Oct. with small banks outperforming large banks by 140bp.

"That said, the large banks outperformed the small banks in the final week of the month (by 230bp) on the back of stronger Q3 earnings results," Bernstein said.

"The PBOC reined in its accommodative monetary policy in Oct withdrawing RMB 100bn of liquidity via OMOs, a reversal from prior 6 months of liquidity injections. This created ST liquidity tension, causing money market rates to rise thru most of Oct," it added.

"In light of the strong performance at the end of the month and increasing investor interest in the Chinese banks, we expect the Chinese banks will continue to outperform the market in the coming months," it said further.