HONG KONG: Hong Kong shares dipped 0.47 percent on profit-taking on Monday, after China last week raised the amount of money banks must hold in reserve.
The benchmark Hang Seng Index shed 109.82 points to end at 23,485.42 on turnover of HK$61.85 billion ($7.95 billion).
The People's Bank of China on Friday said it would hike the reserve requirement ratio for lenders -- effectively capping the amount they can loan -- for a second time this year as it tries to rein in inflation.
Prices rose 4.9 percent in January, still above the government's four percent target and just below November's two-year high of 5.1 percent.
"The Chinese government has just announced new reserve ratios for lenders as inflation continued to increase, and there is no sign that the unrest in the Middle East will be resolved soon," Mark To, head of research at Wing Fung Financial Group, told Dow Jones Newswires.
Mainland banks dropped, with China Construction Bank down 0.9 percent at HK$6.83 and Bank of Communications off 0.5 percent at HK$7.72.
The index was also hit by dealers cashing in after last week's rally over three consecutive sessions.
Shipping firm China Merchant Holding was the biggest loser as it fell 3.4 percent to HK$34.50 after gaining 11 percent last week.
Local developers also fell on expectations Hong Kong Financial Secretary John Tsang will announce new measures to curb the city's property market in his budget speech this week.
Sino Land fell 1.4 percent to HK$14.14 and New World Development was down 1.0 percent at HK$13.98.
Energy companies were supported by a rise in crude oil prices due to tensions in the Middle East. Oil producer CNOOC rose 1.7 percent to HK$17.58 and PetroChina was up 0.9 percent at HK$10.74.
Chinese shares closed up 1.12 percent as gains by power providers and oil firms offset declines in banks after the central bank's move on Friday, dealers said.
The Shanghai Composite Index, which covers both A and B shares, rose 32.46 points to 2,932.25 on turnover of 146.2 billion yuan ($22.2 billion).
"The timing of the hike is a little earlier than expected, indicating tightening moves are still coming thick and fast, despite January's inflation at a milder-than-expected" level, Qian Qimin, an analyst at Shenyin Wanguo Securities, said.
Power companies rose as their attractive valuations invited buying interest. China Yangtze Power rose 0.8 percent to 7.86 yuan and Huadian Power International gained 2.2 percent to 3.28 yuan.
Oil refiners gained after the National Development and Reform Commission, the country's top economic planner, raised gasoline and diesel prices by 350 yuan per metric ton each.
The nation's top refiner Sinopec gained 1.4 percent to 9.27 yuan and PetroChina rose 1.1 percent to 11.71 yuan.
Banks fell on the reserve rate hike, with Industrial and Commercial Bank of China ending down 0.7 percent at 4.30 yuan.
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