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Nikkei Markets

Global growth woes and A-share tumble push Hong Kong stocks lower

PICC Group shares drop on local exchange amid plunge in Shanghai

HONG KONG (Nikkei Markets) -- Hong Kong stocks slumped in the morning session on Friday as the European Central Bank fueled global growth concerns by trimming its outlook and mainland Chinese markets tumbled, reflecting worries over the pace of their recent advances.

The Hang Seng Index fell 1.5% to 28,347.24 by noon, its biggest decline in more than two weeks. Internet services heavyweight Tencent Holdings shed 2.3%, extending Thursday's retreat. People's Insurance Co. Group of China slid 3% to HK$3.54 (45 U.S. cents) in Hong Kong, tracking a tumble for its A-shares. The company's Shanghai-listed shares sank by their daily 10% limit to 11.55 yuan ($1.72) after Citic Securities reportedly issued a sell rating on the stock, giving them a fair value in the range of 4.71 yuan to 5.38 yuan.

The Shanghai Composite Index lost 2.9% by the midday break, paring its gains over the past month to 15.2%. State-affiliated Securities Times wrote in an opinion piece on Friday that the A-share market will be "much healthier" if securities brokerages issued sell ratings as commonly as they gave buy recommendations.

Risk appetite also waned after the ECB cut its 2019 growth outlook for the eurozone to 1.1% from 1.7% in December, and indicated it would not raise rates in 2019. The central bank also outlined plans to provide cheap long-term loans to banks. The U.S. Federal Reserve, which raised rates four times last year, has also indicated it will be patient with future rate increases as concerns about a slowdown mount.

"There is no good news on the company fundamentals front, and positive external news has been priced in already," said Louie Shum, chief executive officer at Sincere Securities. "The ECB's sudden easing reminded people of weak economic outlook and the stock market has to eventually reflect what the economy is doing."

The retreat for A-shares, and recent warnings by Chinese authorities against margin lending and increasing leverage in the stock market will persuade investors to "act smartly," he said, adding that this round of the A-share rally is "coming to an end."

U.S. equities extended losses overnight, with the three major indexes falling 0.8% or more, while the Japanese yen, considered a safe-haven asset, added 0.1% against the dollar on Friday. Most other regional markets traded lower, with the Nikkei Asia300 Index slipping 1.4%.

Hong Kong rail operator MTR rose 1.7%, after the company on Thursday reported better-than-expected 2018 results. Nomura and Daiwa Capital Markets raised their price targets on the stock after the results announcement. Hong Kong-based property developers were among the handful of index constituents trading higher by the midday break, with Sun Hung Kai Properties and Hang Lung Properties climbing 0.4% and 0.3%, respectively.

Automakers Great Wall Motor and BYD fell despite reporting increases in February sales. Great Wall, which reported an 18.3% increase in last month's sales, was down 5.3%. BYD was down 3.8% even as the electric vehicle maker's sales rose 2.1% in February. Geely Automobile Holdings, which fell 7.7% Thursday following a decline in February sales, dropped 3.6%.

Vanke Property (Overseas) climbed 3.2% after saying it agreed to buy properties in London, San Francisco and New York from units of China Vanke for HK$1.14 billion.

Xinyi Solar Holdings slid 7.2% to HK$3.49 after announcing a placement of 380 million shares at HK$3.47 apiece.

China Gas Holdings rose 2.9% to HK$26.50. The company on Friday said it was offering 142.1 million shares at HK$24.85 apiece.

Shui On Land declined 1% after reporting a 25.4% decline in February sales.

Construction and property development company Baoye Group added 2.5% after saying it expects net profit for 2018 to increase at least 30% from a year ago.

Children's personal care products maker China Child Care fell 5.6% after forecasting a wider net loss for 2018.

Online gaming company NetDragon Websoft Holdings declined 2.2% despite saying it expects to have swung to a profit for 2018, compared with a loss last year.

Chinese medicine company PuraPharm Corp. climbed 4.3% after saying it expects to report a "substantial" increase in 2018 net profit from a year ago.

-- Amy Lam

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