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Nikkei Markets

Hong Kong and China markets advance despite trade tensions

ZTE rings in 25% gain after lifting of US supply ban finalized

HONG KONG (Nikkei Markets) -- Hong Kong and mainland China shares rose on Thursday although investors remained cautious about escalating U.S. and China trade tensions.

The Hang Seng Index added 0.6% to reach 28,480.83. The Shanghai Composite rose 2.2% while the Shenzhen Composite advanced 2.7%. The onshore traded yuan strengthened 0.2% to 6.6671 against the U.S. dollar.

Sunny Optical Technology Group climbed 6.7% in Hong Kong, leading percentage gains on the Hang Seng Index, following an 83% jump in June shipment volumes for handset lens sets and a 35.8% increase in handset camera module shipments.

China Resources Land added 2.5% after reporting gross contracted sales of 28.28 billion yuan ($4.23 billion) for June. The developer had reported contracted sales of 10.08 billion yuan a year ago. Energy producers CNOOC and PetroChina slid 0.2% and 0.4%, respectively, after Brent crude futures sank 6.9% on Wednesday.

Despite Thursday's gains for the Hang Seng Index, market participants remain worried about fallout from the escalating trade war. Washington earlier this week threatened to impose tariffs on an additional $200 billion of Chinese goods. The U.S. Department of Commerce on Wednesday said it was starting a new anti-dumping investigation on imports of steel racks from China.

Ben Kwong, head of research and executive director at KGI Asia in Hong Kong, expects investors to remain cautious in the near-term. "The Hang Seng Index will be range bound between 28,000 and 29,000 points as people look ahead to whether China will launch retaliatory measures and if the yuan will stop depreciating."

Kwong recommends that investors buy utility stocks such as CLP Holdings and other Hong Kong-based companies such as CK Hutchison Holdings. CLP added 0.6% on Thursday while CK Hutchison slipped 0.6%.

Chinese telecommunications equipment maker ZTE surged 25.1% in Hong Kong. U.S. authorities on Wednesday signed an agreement that paves the way for the Chinese company to resume doing business with American suppliers. A nearly three-month-long ban on dealings with ZTE will be lifted after it deposits $400 million into an escrow account.

Geely Automobile Holdings gained 2.8% after saying it expects to report a 50% year-over-year increase in net profit for the January-to-June period.

Brilliance China Automotive Holdings however tumbled 12.6% after Chinese media reported that German automaker BMW will hold a majority stake in a joint venture the two companies agreed to set up earlier this week. A BMW spokeswoman declined to comment. Brilliance China could not be reached for comment. China earlier this year said it would allow foreign companies to take a majority stake in automotive joint ventures from 2022. BAIC Motor meanwhile fell 6%.

NetDragon Websoft Holdings rose 2.9%. The Chinese online game developer is considering a spinoff of its education division to help the loss-making business raise funds for expansion, the company's vice chairman said in an interview.

Drug and medical equipment maker Sinopharm Group climbed 2.7% after saying it had agreed to buy 60% of China National Scientific Instruments & Materials from controlling shareholder China National Pharmaceutical Group for 5.11 billion yuan.

China Eastern Airlines rose 3.4% after reporting a 13.7% increase to 9.89 million in its number of passengers carried in June.

Information technology application services provider Sino-I Technology advanced 4.6% to 9.1 Hong Kong cents after its board declared a special dividend of 2.3 Hong Kong cents per share.

Auto parts maker Johnson Electric Holdings added 4.8% after reporting a 16% increase to $872 million in sales for the June quarter.

Alibaba Pictures Group added 1.1%. It said on Wednesday that a unit had agreed to sell online dissemination rights for a drama series for 200 million yuan to Youku Technology, another subsidiary of Alibaba Group Holding.

Cigarette packaging maker Brilliant Circle Holdings added 4.6% after saying it expects to report a "significant" increase in net profit for the January to June period.

-- Amy Lam

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