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Equities

Nikkei Asia300 posts weekly loss amid heightened trade fears

Samsung Electronics and TSMC among the notable decliners during the week

Samsung Electronics lost 2.7% in Seoul over the five-day period .   © Reuters

HONG KONG (Nikkei Markets) -- Asian stocks outside of Japan suffered a weekly loss, as trade tensions continued to weigh on sentiment.

The Nikkei Asia300 Index gained 0.5% to 1,390.93 on Friday, trimming its weekly loss to 0.5%. Samsung Electronics lost 2.7% in Seoul over the five-day period and Taiwan Semiconductor Manufacturing shed 2% in Taipei, while pork processor WH Group fell 6.7% in Hong Kong.

The U.S. government imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union with effect from Friday, triggering a response from its trading partners. Canada and Mexico retaliated with duties of their own on shipments from the U.S., while the EU threatened to tax imports. The U.S., which also said recently it is pushing ahead with proposed tariffs on Chinese imports, has yet to resolve differences on trade terms with Beijing. U.S. Commerce Secretary Wilbur Ross is arriving in China for bilateral talks starting on Saturday.

"Trump appears to be taking a tough stance again to nullify domestic criticism he has gone too easy on China, but it also looks like a negotiating tactic designed to get more out of China ahead of another round of talks," Shane Oliver, head of investment strategist and chief economist at AMP Capital, wrote in a report. "The risk is that China feels it can no longer trust Trump."

Investor appetite for risk assets took a beating earlier in the week amid political turmoil in Italy. On Friday, markets were watching Spain as Prime Minister Mariano Rajoy was ousted after losing a no-confidence vote in parliament.

Stocks in mainland China retreated even as index-compiler MSCI added yuan-denominated A-shares to its equity benchmarks, which are tracked by fund managers with trillions of dollars in assets, with effect from Friday. The Shanghai Composite fell 0.7%.

The inclusion in MSCI Indexes is expected to lead foreign investors to increase the share of Chinese equities in their portfolios over the coming years, at the expense of stocks from other emerging countries.

"Overall, there should be limited implications for other emerging markets, at least in the short term," fund managers at Amundi Asset Management wrote in a report. "Korea stands to be the biggest loser from the inclusion, with estimated outflow of $1.2 billion, followed by Taiwan at $920 million, and India at $584 million."

In Friday's trading, shares of XL Axiata fell 2.8% in Jakarta after it was removed from the MSCI Global Standard Indexes, while Top Glove, which was included, climbed 1.8% in Kuala Lumpur.

Galaxy Entertainment Group sank 3.2% in Hong Kong as casino shares retreated after Macau government data showed weaker-than-expected gross gaming revenue for the industry in May.

Motorcycle maker Bajaj Auto jumped 5.3% in Mumbai after it reported sales of 407,044 vehicles in May, up 30% from a year ago. Carmaker Maruti Suzuki India gained 3.2% after its monthly sales increased 26% year-on-year to 172,512 units.

- V. Phani Kumar

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