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Nikkei Markets

Asian equities fall on concerns US-China trade relations to worsen

Chinese carmakers, insurers drag down A300 Index

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan declined Thursday on concerns that trade relations between the U.S. and China could worsen further.

The Nikkei Asia300 Index of companies outside Japan fell 1.4% to close at 1,243.78. Chinese companies were among the biggest contributors to the losses on the gauge. Hong Kong-listed Chinese social media major Tencent Holdings declined for the sixth straight session, falling 3.8%. Nomura said the losses may be due to mixed quarterly results and fresh concerns over China's macroeconomic outlook amid deteriorating trade talks.

An index of Chinese companies listed in Hong Kong dropped 1.9%, paced by carmakers and insurers. Great Wall Motor slumped 8.8% and Guangzhou Automobile Group slid 2.6%, while China Life Insurance and Ping An Insurance Group slipped at least 1.3% each.

Asian shares came under pressure after U.S. equities posted their third decline in four sessions on Wednesday amid indications that the U.S.-China trade relationship could sour further. Investors trimmed their exposure to risk assets amid reports that the U.S. could deny access for American technology firms to Chinese video surveillance firms on grounded of human rights violations.

The ban on Chinese surveillance companies risked further hurting the relationship between the two major economic superpowers. The trade differences between them took a turn for the worse this month after the U.S. increased tariffs on $200 billion of Chinese goods and barred U.S. companies from doing business with Chinese telecom equipment maker Huawei Technologies. Moreover, the U.S. has threatened to tax the remaining $300 billion of Chinese imports that are currently not subject to any tariffs.

"The probability that the situation continues to deteriorate has obviously risen. We have downgraded China's GDP growth forecasts to 6.2% in 2019 and 5.9% in 2020 from 6.3% and 6% previously," Tommy Wu, a senior economist at Oxford Economics, wrote in a note. "If the U.S. goes ahead with imposing tariffs on almost all Chinese imports, we estimate that China's GDP growth would be reduced by an additional 0.4% in 2019 and 0.3% in 2020."

Meanwhile, Indian equities reversed early gains to end 0.8% lower after hitting record highs in initial session on Thursday. Prime Minister Narendra Modi is poised to win a second term after the alliance he leads headed for a comfortable majority. According to television reports, the alliance was leading in 340 out of the 542 parliamentary seats. India's biggest private lender ICICI Bank added 1.3% and engineering major Larsen & Toubro climbed 1%.

In other major movers on the A300 index, Hong Kong-listed Lenovo Group slipped 2.6%. While the company's fourth-quarter net profit more than tripled on-year, the U.S.-China trade woes weighed on the outlook of the Chinese computer maker.

Suppliers to Huawei came under pressures amid reports that a few telecom operators in the U.K, Japan, and Taiwan suspended orders for Huawei smartphones following the U.S. action on the company.

Hong Kong-listed Sunny Optical Technology Group fell 7.7% and AAC Technologies declined 6.4%. Taiwan Semiconductor Manufacturing slid 3.4%.

Hyundai Heavy Industries rose 2.3%. The South Korean company said it had won an order worth 464 billion won ($389 million) to build two LNG carriers from a European ship owner, Reuters reported.

--Nimesh Vora

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