HONG KONG (Nikkei Markets) -- Hong Kong shares erased initial losses on Tuesday morning to edge higher by midday, paced by pharmaceutical and automobile companies.
The Hang Seng Index added 0.2% to 28,188.14 by noon after falling as low as 27,983.48 earlier. Sino Biopharmaceutical and CSPC Pharmaceutical Group climbed 4.9% and 5.3%, respectively. China plans to cut value-added tax on 21 orphan drugs -- medicines to treat rare conditions -- the State Council decided on Monday in a meeting chaired by Premier Li Keqiang.
Authorities also plan to further shorten the time required for the registration and approval of new cancer drugs. Other mainland drugmakers listed in Hong Kong also rose, with Shanghai Fosun Pharmaceutical Group climbing 4.3% and 3SBio gaining 3.4%.
U.S. equity indexes ended mixed overnight after a round of trade talks began in Beijing. U.S. Trade Representative Robert Lighthizer and Trade Secretary Steven Mnuchin will be meeting Chinese officials later this week. The talks come amid a 90-day truce in the trade war between Washington and Beijing. The U.S. has said it will raise import tariffs on $200 billion worth of Chinese goods to 25% from 10% after the truce ends on March 1.
"Investors are sensitive to news about the talks, but as long as there is no signal about things turning bad, the market will head higher," said Jason Lee, vice president for stocks at Hong Kong consultancy Investment Strategy Institute.
In the mainland, the Shanghai Composite Index added 0.7%, while the yuan traded onshore edged 0.1% higher to 6.7864.
Chinese smartphone maker Xiaomi was up 0.2% at HK$10.72 by midday after rising as high as HK$11.10 earlier in the day. The company's shares will be included in MSCI's Emerging Markets Index effective Feb. 28, the index provider said in a statement. Food delivery app operator Meituan Dianping, whose shares are also being included in the MSCI index, was down 3.8% after climbing as much as 2.9%.
Lee attributed the retreat to profit taking after recent gains. Xiaomi and Meituan had risen 4.3% and 7.8%, respectively, on Monday.
Road King Infrastructure climbed 4% in Hong Kong after saying it expects consolidated net profit for 2018 to have risen at least 45% from a year ago.
Computer components maker Pine Technology Holdings slid 6.2% after saying it expects a net loss for the six months ended Dec. 31 to have widened to $15 million from $1.4 million a year ago.
Greentown China Holdings fell 1.3% following a 30.6% decrease in contracted and subscription sales for January.
-- Carrie Chen