Chinese Stocks Tumble after Rate Hike; Banks Outperform

MarketWatch reports on the interest rate increase announced by the People’s Bank of China today:

Mainland Chinese and Hong Kong shares fell sharply in early Wednesday trading after the central bank surprised markets a day earlier with an interest-rate increase.

Property developers and commodity shares were hit the hardest, but banks outperformed on hopes the rate increase would improve their interest-rate margins.

The Shanghai Composite Index /quotes/comstock/16k!i:000001 (CN:SHCOMP 3,021, +19.57, +0.65%) dropped 1.3% and the Shenzhen Composite Index slid 0.7%, a day after the People’s Bank of China raised both the one-year lending and deposit rates by a quarter-point, to 5.56% and 2.5%, respectively. In Hong Kong, the Hang Seng Index /quotes/comstock/08s!i:hsi (HK:HSI 23,619, -144.55, -0.61%) lost 1.9%.

China’s rate hike is a positive signal for global growth, investment strategist Michael Yoshikami tells MarketWatch’s Laura Mandaro.

The drop came amid fears that more rate hikes could come later on down the line. Several economists, including those at Deutsche Bank, Barclays and Standard Chartered, said the rate increase likely marked the beginning of a tightening cycle in China.

And the Wall Street Journal’s China Real Time blog gets bankers’ perspectives on the move.

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