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Nikkei Markets

Hong Kong shares climb as yuan strengthens with China stocks

Shanghai Composite halts losing streak as MSCI set to raise A-share weighting

HONG KONG (Nikkei Markets) -- Hong Kong shares advanced on Thursday, helped by a rebound for Chinese equities after a string of recent losses and a strengthened yuan.

The Hang Seng Index gained 0.5% to 26,120.77. Internet services heavyweight Tencent Holdings rose 1.12%, while insurer AIA Group climbed 0.5%. China Mobile slipped 0.2% after the mobile services operator reported a 14.6% decline in first-half profit and flat revenue.

The day's gains followed broad gains for U.S. stocks overnight and were aided by positive cues from the mainland. The Shanghai Composite Index advanced 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 with effect from the close of markets on Aug. 27.

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 added.

Some participants remained cautious despite the day's stock advances.

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

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

Besides external headwinds, ongoing city-wide protests in Hong Kong have also been 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 withdrawal of a controversial and now-shelved extradition bill.

Meanwhile, renewed concerns over Sino-American trade relations also weigh 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," South China Morning Post reported, citing China's 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%.

Swire Pacific climbed 3%. During the midday break, the diversified conglomerate announced a 13% increase in interim dividend payout. Its net profit for the first half fell 41% due to lower valuation gains on its investment properties.

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 8.8% after the Chinese hypermarket operator reported a 5% increase in first-half net profit.

Hotels operator Langham Hospitality Investments slid 1.5% 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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