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Nikkei Markets

Hong Kong and China stocks trim losses as Asia sell-off eases

Hang Seng Index has worst week in over two years as virus spreads globally

HONG KONG (Nikkei Markets) -- Hong Kong shares recouped some intraday losses but still ended near a three-year low on Friday, as worries over the new coronavirus continued to weigh on sentiment. Mainland equity markets also ended off lows.

The Hang Seng Index ended 1.1% lower at 24,032.91 after sliding as much as 7.4% earlier. The gauge, which ended at its lowest since April 2017, saw some heavyweights recovering in the afternoon session, with AIA Group and Tencent Holdings adding 0.4% each.

More than 202.43 billion Hong Kong dollars ($26.1 billion) worth of shares changed hands in the city.

The index slumped 8.1% during the week, its largest weekly decline since February 2018.

The losses followed repeated sell-offs on Wall Street this week, especially on Thursday, after U.S. President Donald Trump restricted travel from Europe, escalating worries that the pandemic could now cause a bigger disruption to global trade and travel than previously expected. The Dow Jones Industrial Average plummeted 10% overnight, its worst single-day drop since 1987, while the S&P 500 Index and the Nasdaq Composite shed 9.5% and 9.4%, respectively.

Like Hong Kong, mainland Chinese equities were also more resilient, with the Shanghai Composite Index paring some losses to end 1.2% lower. The yuan traded onshore climbed 0.5% against the dollar to 6.9915.

"The impact of the U.S. market crash on Hong Kong is limited. The local market will subsequently return to fundamentals and we will see capital returning," said Yan Yang, fund manager and head of research for greater China at Atlantis Investment Management. "We remain optimistic about Hong Kong stocks and A-shares. Although an economic downturn is inevitable, market liquidity remains abundant."

Markets in the rest of Asia also recovered, with Thailand's benchmark equity index edging 0.1% higher after falling more than 10%, and India's benchmark BSE Sensex rising about 4% after sliding over 9% earlier. The Nikkei Asia300 Index was down 0.9%.

Yang said she was "not that pessimistic" about China's markets as long as demand and supply got back on track, coupled with government stimulus efforts.

Major central banks have already cut rates to combat the impact of the virus on their economies. The U.S. Federal Reserve is widely expected to reduce rates for a second time this month when it meets to review policy next week. The European Central Bank, meanwhile, held off on interest rate cuts at its review on Thursday.

United Company Rusal slumped 5% in Hong Kong after the aluminum producer reported a 43.5% plunge in 2019 profit and a 5.5% decrease in revenue. The company said it expected the coronavirus outbreak to negatively affect China's aluminum market in the first half of this year with a bigger supply glut and weak demand.

Dongfeng Motor Group slid 4.7% following an 80.7% tumble in February sales volume.

China Resources Land slipped 0.9% after reporting a 39.3% drop in February gross contracted sales.

-- Benny Kung

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