June 15, 2017 / 8:47 AM / a year ago

Hong Kong stocks end at 3-week low as rates rise

June 15 (Reuters) - Hong Kong stocks fell to a three-week low on Thursday, led by the property sector, as borrowing costs in the city looked set to rise after a U.S. interest rate hike.

An index tracking mainland companies listed in the city posted its biggest one-day percentage loss in six weeks, amid worries that China’s economic recovering is losing steam.

The Hang Seng index fell 1.2 percent, to 25,565.34, while the China Enterprises Index lost 1.6 percent, to 10,346.15 points.

Hong Kong’s central bank raised its base rate 25 basis points earlier in the day after the U.S. Federal Reserve lifted its policy rate as expected overnight. Hong Kong rates move in line with the U.S. due to the city’s currency peg.

The head of the Hong Kong Monetary Authority (HKMA), Norman Chan, said he expects banks in the territory to gradually raise mortgage rates, which could hit shares of property developers.

Chan added he expects there could be an increase in capital outflows from the financial hub due to arbitrage trade with the local currency.

Most sectors fell, with the decline led by the real estate sector, which is vulnerable to higher borrowing costs. (Reporting by the Samuel Shen and John Ruwitch; Editing by Jacqueline Wong)

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