Hong Kong stocks fell for the first time in four days, led by banks after the People's Bank of China (PBoC) raised reserve requirements and after higher fuel prices dragged down airlines.

The Hang Seng Index (HSI) fell 0.5 percent to 23485.42 at the close, with about five stocks declining for every three that advanced among the measure's 45 constituents. The Hang Seng China Enterprises Index dropped 0.7 percent to 12651.38.

Financial stocks had the biggest slide among the HSI's four industry groups. Agricultural Bank dropped 0.5 percent to HK$3.88. China Construction Bank Corp sank 0.9 percent to HK$6.83. Bank of China Ltd retreated 0.5 percent to HK$4.11.

The central bank ordered lenders to set aside more money as reserves for the second time this year. Reserve ratios will climb half a percentage point effective Feb 24, the PBoC said on Feb 18, in an announcement made 10 days after an interest-rate increase.

Shares in the gauge traded at an average 12.7 times estimated earnings Monday, compared with about 17.2 times at the start of 2010.

Chinese airlines dropped after the nation raised jet fuel prices. China Southern Airlines Co dropped 4 percent to HK$3.86. Air China Ltd fell 2.3 percent to HK$8.02, while China Eastern Airlines Corp slid 2.4 percent to HK$3.64.

China increased the ex-factory cost of No 3 jet fuel to 6,340 yuan ($965 million) a metric ton from 5,990 yuan, according to a Feb 19 posting on the National Development and Reform Commission's website.

While airlines retreated because of higher jet fuel costs, oil-related companies rose from a boost in retail gasoline and diesel prices. PetroChina Co gained 0.9 percent to HK$10.74. Cnooc Ltd increased 1.7 percent to HK$17.58.

The HSI Volatility Index rose as much as 7 percent Monday, as unrest spread in the Middle East. The measure tracks expected equity-market volatility over the next 30 days, based on the cost of index options on the Hong Kong Stock Exchange. The benchmark for Hong Kong stock-market volatility was created by HSI Co.

Futures on the HSI slid 0.6 percent to 23447.

Bloomberg

(HK Edition 02/22/2011 page3)