Hong Kong blue chips and Shanghai shares ended lower on Friday after Beijing raised key interest rates for the first time in nine years, in its boldest move yet to guard against an overheating economy.
The Shanghai composite index closed down 1.58 percent at 1,320.5 points after recovering swiftly from a near 3 percent slide on a rally in bank shares. Analysts said the rate hike should boost margins for an industry that depends on interest income for most of its earnings.
Traders said China commodities stocks would continue to come under selling pressure next week, but that the rate hike should help to deflate speculative investment and stabilise markets.
Dollar bond debt markets in Asia were little changed as traders shrugged off the long-awaited rate increase, but the Hong Kong dollar weakened slightly as dealers felt the move was a sign that any currency revaluation by China was far off.
Copper prices bounced back in early London Metals Exchange trade but stocks in industries such as property, steel, autos and cement suffered heavy losses.
Hong Kong's blue-chip Hang Seng Index ended the trading day down 0.45 percent, or 58.49 points, at 13,054.66, after dropping over 0.6 percent in morning trade. Turnover was heavy at HK $17.9 billion (US $2.3 billion), compared to HK $13.8 billion on Thursday.
China enterprise stocks listed in Hong Kong, also known as H-shares, fell 1.61 percent, or 73.80 points, to 4,504.78.
China's central bank announced on Thursday that it was raising interest rates by over a quarter of a percentage point in its boldest move yet to guide its economy to a path of slower, more manageable growth, and to curb the country's insatiable appetite for copper, oil and other commodities.
There was a mixed response as to what the move means for China's economy, with some fearing the hike could be the first in a series of tightening measures and possibly a prelude to a yuan revaluation.
Among Chinese commodity stocks listed in Hong Kong, Jiangxi Copper Co Ltd fell 7.82 percent to HK $4.125 while Angang New Steel fell 5.26 percent to HK $3.15.
The world's second largest producer of alumina, Aluminium Corp of China Ltd (Chalco), fell 6.81 percent to HK $4.45 and Maanshan Iron and Steel Co fell 6 percent to HK $2.725.
Offshore oil and gas producer CNOOC Ltd was the main blue-chip loser, falling 4.76 percent to HK $4 after the company announced late on Thursday that its CFO Mark Qiu will not be renewing his employment contract when it comes up for re-negotiation early next year.