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The Chinese government’s first seizure of a bank in more than two decades reverberated through markets for a second day, driving up funding costs for smaller lenders and adding pressure to shares that already trade at rock-bottom valuations.

A Bloomberg index of Hong Kong-listed Chinese banks is set for its biggest monthly loss this year after regulators assumed control of Baoshang Bank Co. on Friday citing “serious” credit risks. With the interbank repurchase rate jumping to the highest in a month and loss-absorbing bonds, known at AT1s, slumping across several small lenders, policy makers on Tuesday injected more cash into the banking system. Baoshang was part of the investment conglomerate led by financier Xiao Jianhua, known as the Tomorrow Group, which is being probed by Chinese officials, according to people familiar with the investigation.

The fall of Baoshang has its roots in the off-loan-book transactions that China’s small banks use to work around rules that restrict them from lending to weak borrowers, as well as evade capital and provisioning requirements. The move will probably heighten investor concerns about the true quality of lenders’ assets, what may trigger the next seizure, and how swiftly authorities will act, according to China International Capital Corp.

Read: China’s First Bank Seizure Since 1998 Shows Hidden Loan Risks

“We foresee visible share price pressure on city commercial banks with similar asset scale or those focusing on Baoshang Bank’s neighboring regions,” CICC analysts led by Victor Wang said in a note Monday.

Baoshang’s bonds were suspended from trading on Monday after yields were indicated up by about 70 basis points. Overseas-traded AT1s fell at several small Chinese banks, according to Bloomberg-compiled prices.

Huishang Bank Corp.’s 5.5% AT1s sank by a record 3 cents on the dollar Tuesday morning, while Bank of Zhengzhou Co.’s 5.5% note declined the most since December and China Zheshang Bank Co.’s 5.45% bond had the steepest drop in a year.

China’s central bank injected a net amount of 150 billion yuan through open-market operations on Monday and Tuesday, the most since the week ended March 8.

S&P Global warned on Monday that some aggressive small banks are “susceptible to an economic slowdown because their risk management capability can’t keep up with their breakneck pace of growth.”

Regional banks in China’s rust-belt provinces drove the rapid expansion of non-traditional lending that peaked in early 2018 to propel profit growth. Smaller firms, who used shadow-loan instruments to diversify from their struggling home provinces, exposed themselves to a much wider spectrum of Chinese corporate risk, according to a 2017 UBS report.

Some lenders are already seeing their shares trade at distressed valuations. Heilongjiang’s Harbin Bank Co. is trading at about 0.34 times book value, while Liaoning’s Shengjing Bank Co. is at 0.41 times, according to data compiled by Bloomberg. That compares with the 0.7 times average price-to-book ratio at Chinese banks listed in Hong Kong.

Read more: China’s Bank Seizure Points to Wider Stresses

Most of the city and rural commercial banks listed in Hong Kong have declined this year, led by Bank of Gansu Co., which plunged 27%, and Jilin Jiutai Rural Commercial Corp., which is down 36%. The drop compares with a 1.9% fall for the country’s five biggest lenders.

Bank of Nanjing Co., Jiangsu Changshu Rural Commercial Bank Co., Bank of Ningbo Co. and Bank of Shanghai Co., which have relatively better earnings visibility, will outperform, according to Ma Kunpeng, a Shanghai-based analyst at Shenwan Hongyuan Group Co.

“The Baoshang case will push for deeper divergence among China’s smaller banks,” Ma wrote in a note. “Those with core competitive advantages will stand out in the long term.”

— With assistance by Alfred Liu, Lianting Tu, Jun Luo, Lucille Liu, and Tian Chen

( Updates shares in second paragraph. A previous version of this story corrected details on the amount of cash injected by the central bank. )