Hong Kong and mainland stock markets fell yesterday, undermined by banking stocks which lost ground in response to the news that the People's Bank of China had cut rates for the first time since 2008.
The fall in the banking stocks more than cancelled out gains by developers and power companies.
The Hang Seng Index closed down 0.94 per cent at 18,502.34. The Hang Seng China Enterprises Index, also known as the H-share index, dropped 1.27 per cent to 9,352.79.
Big movers of the HSI included Industrial and Commercial Bank of China, China Construction Bank, Bank of China and the Agricultural Bank of China, which plunged because of fears that their margins would be threatened by the rate cut. Investors are also concerned at China Banking Regulatory Commission plans to crack down on non-performing loans.
Stocks of mainland developers rose on expectations that the rate cut would help a faltering property market, and reduce their debt servicing costs. Guangzhou R&F Properties gained 4.43 per cent to HK$10.38 while Agile Property Holdings rose 5.23 per cent to HK$9.25.
Power companies, which tend to be highly geared, also rallied. Huaneng Power International rose 3.65 per cent to close at HK$5.40. Datang International Power Generation was up 3.10 per cent to close at HK$2.99.