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Nikkei Markets

Hong Kong shares climb as mainland China stocks and yuan advance

China Mobile rises ahead of results, while Q Tech jumps on July sales data

HONG KONG (Nikkei Markets) -- Hong Kong shares headed higher on Thursday, tracking overnight gains on Wall Street and a rebound for Chinese equities after a string of recent losses.

The Hang Seng Index gained 0.7% to 26,170.41 by noon. Internet services heavyweight Tencent Holdings rose 2%, while insurer AIA Group climbed 0.8%. China Mobile advanced 1% ahead of its first-half earnings announcement. During the break, the mobile services operator reported a 14.6% decline in first-half profit and flat revenue. The three stocks contributed almost half of the index's gains by points.

The S&P 500 Index rose 0.1% overnight following a 1.3% advance on Tuesday, while the technology-heavy Nasdaq composite Index added 0.4%.

In the mainland, the Shanghai Composite Index was up 0.9% after declining for six straight days. Index provider MSCI on Thursday said it would implement the second step toward increasing the weighting of China A-shares in its Emerging Markets Indexes in August. As part of this, MSCI will increase the inclusion factor for 260 existing China A-share constituents to 0.15 from 0.1. Eight China A-shares will be added to the MSCI China Index, it said.

The Hang Seng Index was on course for a second day higher following a five-day losing streak that lowered it by 7.7%.

Steven Leung, executive director at UOB Kay Hian (Hong Kong), noted that there are not many favorable factors for the local market and that he does not see "much upside" in the short term.

Besides external headwinds, ongoing citywide protests in Hong Kong are also dampening investor sentiment. Tens of thousands of demonstrators have taken to the streets in recent weeks, demanding the resignation of Chief Executive Carrie Lam and the complete withdrawal of a controversial and now-suspended extradition bill.

"As the situation worsens, it could prevent people from building positions," Leung said.

Meanwhile, renewed concerns over Sino-American trade relations also weighed on investor sentiment, after U.S. President Donald Trump last week unexpectedly announced plans to impose fresh tariffs on Chinese goods. Following the announcement, Beijing allowed its tightly controlled currency to weaken to levels not seen in a decade.

The People's Bank of China on Thursday set its official yuan midpoint at 7.0039 to the dollar, the weakest since 2008. The currency was up 0.2% at 7.0437 against the dollar on Thursday.

Despite the recent escalation in the Sino-American trade spat, the next round of talks, scheduled for early September in Washington, will likely take place "as planned," the South China Morning Post reported, citing Chinese former Vice Minister Wei Jianguo.

Data released on Thursday showed China's exports rose 3.3% in July, while imports fell 5.6%. Economists polled by Reuters were expecting exports to have fallen 2% from a year ago last month and imports to have contracted by 8.6%.

Q Technology Group advanced 2.6% in Hong Kong after the smartphone components supplier reported a 48.2% jump in total sales volumes for camera modules in July.

Sun Art Retail Group jumped 7.7% after the Chinese hypermarket operator reported a 5% increase in first-half net profit.

China Tower added 0.5% after the telecommunications tower service provider reported a more than doubling of its first-half profit and a 7.5% increase in operating revenue.

Hotelier Langham Hospitality Investments slid 3% following a 4.8% decline in profit for the first six months of 2019. The company said recent protests in Hong Kong would affect its hotel businesses "at least over the second half."

-- Benny Kung

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