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Nikkei Markets

Chinese companies drive Hong Kong stock gains on policy bet

State Council signals potential for more cuts to bank reserve requirements

HONG KONG (Nikkei Markets) -- Hong Kong shares headed higher on Thursday, led by gains for Chinese companies listed in the city, after mainland authorities signaled the possibility of more monetary policy support for Asia's largest economy.

The Hang Seng Index had risen 0.4% to 26,624.25 by noon. Mainland financial heavyweights China Construction Bank and Ping An Insurance Group rose 2.2% and 1.6%, respectively.

Sino Biopharmaceutical added 2.7% after saying its antitumor medicine obtained drug registration approval from China's National Medical Products Administration.

In the mainland, the Shanghai Composite Index jumped 1.6%, while the Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong rose 1.4%. China will make "timely use" of broad and targeted reserve requirement ratio cuts for banks, the State Council, China's cabinet, said in a meeting on Wednesday.

The People's Bank of China in January lowered banks' RRR by 100 basis points in two stages. Hopes for a further reduction have lingered as Sino-American trade tensions take a toll of the Asian nation's economic growth.

"Expectations for an RRR cut this month have increased. Investors are also wondering if the central government will speed up its plans for infrastructure investments," said Alvin Ngan, an analyst at Zhongtai International Securities.

Local investors, meanwhile, were digesting a move by the city's Chief Executive Carrie Lam to formally withdraw an extradition bill that sparked months of protests in the Asian financial center.

The local equity benchmark jumped 3.9% on Wednesday after news reports signaled the planned withdrawal. While the bill was the initial trigger for weekslong widespread protests in the city, activists' demands currently also include a call to cancel the description of the movement as a riot, drop charges against protesters, conduct an independent investigation into police actions during recent clashes, and grant universal suffrage.

Pro-democracy activists have said the move to pull the bill was "too little, too late."

"The big rebound was over yesterday," said Ngan. "The five demands from protesters are bundled, so it seems the protesters are not just asking for a mere withdrawal."

Local property developers Sun Hung Kai Properties and New World Development declined 2.9% and 3.4%, after rising 9.8% or more on Wednesday following news reports of Lam's expected move.

Markets in the rest of Asia climbed amid hopes for a resumption in Sino-American trade talks, with the Nikkei Asia300 Index rising 1%. China and the U.S. are expected hold trade talks in early October in Washington, according to China's Ministry of Commerce.

The plans follow a phone call between Chinese Vice Premier Liu He, and American Treasury Secretary Steven Mnuchin and Trade Secretary Robert Lighthizer earlier on Thursday.

Cathay Pacific Airways shed 3%. The airline late Wednesday announced that its Chairman John Slosar had resigned to retire. The announcement came less than three weeks after Chief Executive Officer Rupert Hogg resigned. Hogg's resignation came days after a Chinese regulator issued a safety risk warning to the Hong Kong carrier over its management of staff who had participated in the city's mass protests.

Hong Kong-based cosmetics retailer Sa Sa International Holdings, which surged 11.1% on Wednesday, slid 6.3% by the midday break. Retailers have suffered in recent months as tourist arrivals into Hong Kong declined in the wake of the protests.

Chow Tai Fook Jewellery Group edged 0.6% lower after jumping 9.7% on Wednesday.

Liquid crystal display products maker Truly International Holdings rose 4.1% following an 11.6% increase in net consolidated turnover for August.

--Benny Kung

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