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Nikkei Markets

Hong Kong shares begin rebound as Italian political turmoil eases

Sinopec leads Chinese energy producers higher as oil prices climb

HONG KONG (Nikkei Markets) -- Hong Kong shares rebounded Thursday morning as investor risk appetite improved after concerns over a political crisis in Italy eased.

The Hang Seng Index climbed 0.8% to reach 30,282.91 by noon after closing at a three-week low on Wednesday. China Petroleum & Chemical (Sinopec) climbed 4.7% to lead energy producers on the gauge higher after U.S. crude prices climbed 2.2% overnight.

Tencent Holdings, the most valuable company listed in Hong Kong, advanced 0.6% after declining the two previous days. On Wednesday, China's Dalian Wanda Group said the social media company would be part of a joint venture integrating online and offline consumer businesses.

U.S. equities recovered overnight, with the Dow Jones Industrial Average and the S&P 500 Index climbing 1.3% each after Italy's president met with the anti-establishment Five Star Movement and the right-wing League about forming a new coalition government to avoid fresh elections.

Concerns that a snap election could turn into a de facto referendum on Italy's role in the EU have rattled investor sentiment this week. The yield of U.S. Treasurys climbed on Wednesday while the Japanese yen edged 0.1% lower against the U.S. dollar Thursday morning.

"We can see the rebound in the Hong Kong market is not as strong as the U.S. market, as investors still have concerns over the Sino-American trade war and there is still a big chance the Italian situation will change," said Jackson Wong, an analyst at Huarong International Securities. "As MSCI inclusion is about to come into effect, it may trigger substantial fluctuations in some shares in the last couple of minutes before the market close" on Thursday, he said, adding that investors should keep a watch on Tencent and Chinese banking shares.

On Friday, MSCI will include mainland-listed shares into its regional and global indexes for the first time, a move seen as boosting global investment into Chinese equities. MSCI's indexes are tracked by fund managers with trillions of dollars in assets worldwide.

Market participants broadly agree that the inclusion will be a significant event for global capital markets. HSBC Greater China Chief Executive Helen Wong has said yuan-denominated shares could pull in flows of more than $600 billion over the next five to 10 years.

Some fund managers however have raised concerns. Ross Teverson, head of strategy for emerging markets at U.K.-based Jupiter Asset Management, said inclusion could eventually increase the representation of Chinese stocks in the MSCI Emerging Markets Index to 40% from around 30% at present, based primarily on those listed in Hong Kong and New York.

"This would be a high level of country concentration, and therefore single country risk, for an asset class that comprises over 20 different countries," he wrote in emailed comments. His company manages more than 50 billion pounds ($66.5 billion) in assets.

The Shanghai Composite added 1.4% on Thursday morning while its Shenzhen counterpart rose 1.2%. The Nikkei Asia300 Index of regional companies outside Japan added 0.5%.

Liquid-crystal display products maker Truly International Holdings added 1.2%, trimming month-to-date losses to 8.9%, after it reported an 80% plunge in first-quarter profit and a 26.3% decline in revenue. The stock had tumbled 7.5% on May 24 after the company warned of the profit decline.

ITC Properties Group slid 4.2% after saying it expects to report a significant decrease in net profit for its financial year that ended in March.

Publisher One Media Group climbed 3.2% after saying its loss for the fourth-quarter ended in March narrowed to 4.02 million Hong Kong dollars ($512,340) from HK$54.3 million a year ago. Revenue for the period increased 3.4% to HK$22.43 million.

Freight-forwarding company China Best Group jumped 14.3% to 8.8 Hong Kong cents after saying it plans to place up to 1.45 billion shares at 7 Hong Kong cents apiece to not less than six investors.

Consun Pharmaceutical Group tumbled 8% to HK$8.81. Far East Horizon sold its entire 80.59 million-share stake in Consun at HK$8.55 apiece, the bottom of a previously indicated pricing range, Thomson Reuters publication IFR reported.

Champion Technology Holdings plunged 29.6% to 50 Hong Kong cents after announcing an issue of about 228 million rights shares at 40 Hong Kong cents apiece.

Willas-Array Electronics added 3% after reporting a near-tripling of its profit from continuing operations for year ended March 31 and a 17.3% increase in revenue.

-- Carrie Chen

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