China and Hong Kong stocks open higher after cenbank unveils rate reform

SHANGHAI, Aug 19 (Reuters) - China and Hong Kong stocks started the week higher, after Beijing unveiled a key rate reform to steer funding costs lower for firms in the latest move by authorities to support a stuttering economy.

The CSI300 index rose 0.7 percent to 3,735.75 points at 1:34 GMT, while the Shanghai Composite Index gained 0.5 percent to 2,838.05 points.

The Hang Seng index in Hong Kong was up 1.5 percent, to 26,124.85 points.

China’s central bank unveiled a key interest rate reform on Saturday to help steer borrowing costs lower for companies and support a slowing economy that has been hurt by a trade war with the United States.

“The tool (LPR quotation reform) equals to a guided rate cut, and is only pushed out by the PBOC at crucial moments,” said Dai Zhifeng, analyst with Zhongtai Securities Co.

Most sectors climbed, led by real estate firms which are expected to benefit from lower borrowing costs.

Bucking the broad rally, shares in banking firms slid, on expectations their profitability would come under pressure after the rate reform.

The CSI300 banking index dropped more than 0.7% (Reporting by Luoyan Liu and David Stanway Editing by Shri Navaratnam)