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Hong Kong shares flat as US-yield fears eclipse Tencent rally

AIA Group and mainland financial stocks drag on the Hang Seng Index

HONG KONG (Nikkei Markets) -- Hong Kong shares were little changed by noon on Thursday, as persistent weakness for the city's currency and rising U.S. bond yields overshadowed a rally by heavyweight Tencent Holdings after it reported better-than-expected results.

Social-media and gaming major Tencent, the most-valuable company listed in Hong Kong, had climbed 5.1% by the midday break after it reported a 61% surge in March quarter net profit and a 48% increase in revenue. The stock, which jumped as much as 7.1% earlier in the day, was the top gainer on the Hang Seng Index.

The Hang Seng Index had edged 0.04% lower to 31,097.96 by noon after changing directions at least nine times. Mainland financial stocks retreated, with lenders China Construction Bank (CCB) and Industrial & Commercial Bank of China (ICBC) shedding 0.8% and 1.3%, respectively, while Ping An Insurance Group dropped 0.4%. Insurer AIA Group fell 0.8%, the biggest contributor to the index's loss by points.

The Hong Kong Monetary Authority intervened in the currency market on Wednesday -- the second time this week -- according to Reuters, after the Hong Kong dollar fell to the lower end of its trading range against the greenback. It was at 7.8495 against the U.S. dollar on Thursday. Investors were also concerned over potential outflows from regional equity markets as the U.S. 10-year bond yield hovered near seven-year highs.

"There are outflows after the Hong Kong dollar reached the weak end of its range," said Jason Lee, vice president for stocks at investment consultancy Investment Strategy Institute in Hong Kong. Even Tencent is off its intraday high, a sign that "many investors are eager to lock in profit and sell in a much-awaited rally."

Hong Kong and mainland markets now await MSCI's inclusion of A-shares into its emerging market index, taking effect next month. "If the A-share market gains because of the MSCI inclusion, improved investor sentiment will bring more southbound mainland China money into the Hong Kong stock market," Lee said.

The Shanghai Composite Index had slipped 0.2% by noon, while the Nikkei Asia300 Index had eked out a 0.1% advance, as uncertainty over trade relations between the U.S. and China and renewed concerns about North Korea kept investors cautious. North Korea this week cancelled a meeting with South Korea, leading to uncertainty over a scheduled summit with the U.S. next month.

Alibaba Health Information Technology, a unit of ecommerce major Alibaba Group Holding, jumped 11.9% in Hong Kong after it said its net loss for the year ended March 31 narrowed to 107 million yuan ($16.8 million) from 207.6 million yuan a year ago. Revenue for the period surged more than five times to 2.44 billion yuan.

TPV Technology tumbled 10.3% after the maker of televisions and monitors swung to a loss of $8 million for the March quarter.

Victory City International Holdings surged 11.9%. The garment maker on Wednesday said it expects to report a "significant increase" in net profit for the year ended March.

Advanced Semiconductor Manufacturing slid 4.7%. The chipmaker said it swung to a net loss of 4.2 million yuan in the March quarter, even as revenue rose 8.3% to 240.8 million yuan.

-- Amy Lam

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