HONG KONG (Nikkei Markets) -- Hong Kong shares headed for a second day higher on Friday, as hopes of a preliminary trade deal between the U.S. and China lingered even as a deadline for more American tariffs on Chinese goods loomed.
The Hang Seng Index added 0.7% to 26,396.92 by noon after rising 0.6% on Thursday.
Internet services heavyweight Tencent Holdings rose 1.5%, contributing most to the gauge's gains by points. Smartphone components supplier Sunny Optical Technology Group jumped 5.1%, building on a 5.3% surge Thursday.
Hong Kong rail operator MTR rose 1.5% even as it warned profit for the year ended Dec. 31 will likely be lower than a year ago due to the impact on traffic and damage to its facilities amid social unrest in the city.
Investors are waiting for further indications that the U.S. and China will sign a phase one trade agreement before a Dec. 15 deadline, when Washington is expected to impose tariffs on Chinese goods worth more $150 billion.
U.S. President Donald Trump on Wednesday said trade talks with China for an interim deal were going "very well." China's Commerce Ministry on Thursday said trade negotiators from both countries had maintained close communications.
"Sentiment is cautiously optimistic that we will have a trade deal not least because it is everyone's interest," said Andrew Sullivan, director at Pearl Bridge Partners.
Castor Pang, head of research at Core Pacific Yamaichi International (H.K.), said it appeared the market is "less pessimistic" about the trade relationship between the two countries.
Still, "the magnitude of the rebound will not be very big," he said, adding that even though the trade atmosphere is improving, investors are not likely to increase their total exposure as we near the end of the year.
Meanwhile, Hong Kong is readying for more protests on the weekend, with a planned march for Sunday having received police approval. Anti-government demonstrations in the city, which began in June and turned increasingly violent in recent months, have shown little sign of easing as activists demand broader democratic rights.
"Unrest in Hong Kong will continue, but I believe the Hong Kong stock market will reflect U.S.-China trade negotiations instead of the social uncertainty," Pang said. Most companies listed in Hong Kong are based in China and derive a chunk of their revenue from the mainland.
In the mainland, the Shanghai Composite Index was little changed.
China Overseas Land & Investment added 0.7% in Hong Kong following a 13.1% increase in November contracted property sales. China SCE Group Holdings rose 1.3% after saying contracted sales for November rose to 9.63 billion yuan ($1.37 billion) from 7.32 billion yuan a year ago.
Yuexiu Property edged 1.2% higher following a more than threefold jump in contracted sales for last month. China Overseas Grand Oceans climbed 2.7% following a near doubling of its November contracted sales.