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Nikkei Markets

Hong Kong shares climb on signs US-Iran tensions easing

Yuan strengthens after lower-than-expected monthly inflation reading

HONG KONG (Nikkei Markets) -- Hong Kong shares advanced on Thursday in line with gains in the region amid a rebound in risk appetite, with some traders optimistic that U.S.-Iran tensions were unlikely to escalate.

The Hang Seng Index added 1.1% to 28,385.25 by noon. Among heavyweights, internet services company Tencent Holdings rose 1.7%, while pan-Asia insurer AIA Group rose 0.9%.

Sino Biopharmaceutical advanced 2.5% after saying that Fosaprepitant for Injection, its treatment for the prevention of chemotherapy-induced nausea, received marketing authorization in the European Union.

Energy producers CNOOC and PetroChina slipped 0.6% and 1.5%, respectively, after global oil prices fell more than 4% overnight.

Tensions between the U.S. and the Middle East were seen as easing after Tehran's attack on American forces in Iraq on Wednesday resulted in no casualties. Iran's Foreign Minister Javad Zarif said in a tweet on Wednesday that the nation just "took and concluded proportionate measures in self-defense," adding that Iran was not seeking "escalation or war."

President Donald Trump later made conciliatory remarks in a televised address, saying he wanted to work toward "a deal with Iran that makes the world a safer and more peaceful place."

Iran's missile attack on U.S.-Iraqi air bases followed the killing of Iranian Maj. Gen. Qassem Soleimani at the Baghdad airport last week. Both actions saw investors fleeing to safe-haven assets amid worries there might be a full-blown war.

"The days with the highest risk were the ones following Soleimani's death," said Steven Wong, senior investment analyst at Harris Fraser Group. "Actions that could crash the global stock market should come to an end for now."

The Nikkei Asia300 Index added 1.3%, while U.S. equity futures pointed to a stronger opening on Wall Street.

Wong said the Hong Kong stock market has room for more recovery, as social unrest in the city "was getting quiet" and the U.S. and China were close to a phase one trade deal.

In the mainland, the Shanghai Composite Index rose 0.5%, while the yuan traded onshore jumped 0.2% against the dollar to 6.9281.

Data released Thursday showed China's consumer inflation came in at 4.5% for December, slower than the 4.7% rate economists were expecting, according to Bloomberg. Still, inflation was at an eight-year high, hurt by a surge in pork prices following the devastation caused in recent months by the African Swine Fever epidemic.

"The big picture is that demand-side pressures remain subdued, leaving ample space for policymakers to ease monetary policy," Julian Evans-Pritchard, an economist at Capital Economics, wrote in a note.

The People's Bank of China cut banks' reserve requirement ratio -- the amount of cash lenders must hold in reserve -- earlier this month. It is widely expected to lower its Loan Prime Rate next week.

China Citic Bank added 0.9% after reporting a 7.9% increase in preliminary net profit for the year ended Dec. 31.

Luxury car dealer China Harmony New Energy Auto Holding jumped 5.8% after its unit agreed to buy three companies, owning Ferrari, Bentley and Audi outlets in China.

Yuexiu Property rose 1.7% following a 5% increase in December contracted sales. Powerlong Real Estate Holdings advanced 1.2% following a 43.5% jump in contracted sales for last month.

Power company China Suntien Green Energy gained 1.4% after reporting a 16.4% increase in total power generation for the fourth quarter.

-- Benny Kung

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