June 20 (Reuters) – Emerging market stocks fell for the second straight session on Tuesday as a modest rate cut from China disappointed investors awaiting bigger policy stimulus from the country to boost its faltering economic growth.

MSCI’s index of emerging market equities .MSCIEF was 0.8% lower at 0817 am GMT, hovering near one-week lows.

The People’s Bank of China cut its key lending benchmarks on Tuesday to shore up a slowing economic recovery, but the cut to the five-year rate, on which mortgage rates are based, was not as large as markets had expected.

Equities in mainland China CSI300 and Hong Kong .HSI were a big drag, with the Hang Seng Mainland Property Index .HSMPI slumping nearly 4%.

“It (the smaller rate cut) does suggest that the PBoC is unwilling to bolster the already inflated housing markets to support growth. Instead, the central bank believes the oversized household savings at present should be able buttress consumption going forward even without mortgage payment relief,” said Piotr Matys, senior FX analyst at In Touch Capital Markets.

Hopes of major policy stimulus from China had helped EM stocks log solid gains last week, after the country lowered some lending rates to aid its economy through a rocky post-pandemic recovery.

Also denting sentiment, China and the United States failed to produce any major breakthrough during a rare visit to Beijing by U.S. Secretary of State Antony Blinken, though both parties agreed to stabilize their intense rivalry.

EM currencies .MIEM00000CUS were down 0.1%.

The Hungarian forint EURHUF= slipped 0.2% against the euro ahead of a local interest rate decision where the central bank is expected to deliver another cut to the one-day deposit rate.

Turkey is working on extending a measure limiting annual rent increases to a maximum of 25%, Justice Minister Yilmaz Tunc was quoted as saying late on Monday by state-owned Anadolu news agency.

The lira TRYTOM=D3 was slightly weaker at 23.6075 against the dollar.

The South African rand ZAR= rose 0.2% against the dollar, extending gains to the fifth straight day. South Africa’s composite leading business cycle indicator fell 1.0% month on month in April, central bank data showed on Tuesday.

(Reporting by Amruta Khandekar; Editing by Sharon Singleton)