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Nikkei Markets

Hong Kong shares drop for third week amid trade frictions

Sunny Optical and Tencent lead weekly losses

HONG KONG (Nikkei Markets) -- Hong Kong shares completed their third weekly decline on Friday, as uncertainty over Sino-American trade relations turned investors cautious.

The Hang Seng Index rose 0.3% to 27,353.93 on Friday, but fell 2.1% for the week. Heavyweight Tencent Holdings shed 8.7% during the week, extending losses after it reported first-quarter results earlier this month. It was the stock's worst weekly performance since November.

Sunny Optical Technology Group slumped 11.3% over the past five days, leading percentage declines on the gauge for a second consecutive week after its customer Huawei Technologies was added to a list of entities that would need U.S. government approval to buy components and technology from American companies. AAC Technologies Holdings, which also supplies parts to Huawei, dropped 2.4% during the week.

In Friday's trading, Tencent and Sunny Optical lost 0.4% each, while AAC Technologies rose 1.8%.

The U.S. move on Huawei came shortly after Washington raised tariffs on $200 billion-worth of Chinese goods and Beijing announced a planned retaliation. U.S. President Donald Trump on Thursday said Huawei could be included in a trade deal between the two countries.

The last round of trade talks between the world's largest economies took place earlier this month, with Trump and Chinese President Xi Jinping scheduled to meet at a G-20 summit in Japan in June.

"This conflict is unlikely to be resolved in the near-term, so the rebound should be short-lived," said Linus Yip, chief strategist at First Shanghai Securities. "If there is no progress in trade talks, market sentiment will still tend to be cautious. The Hang Seng Index will have a downward bias in the short term."

Meanwhile in China, the Shanghai Composite Index ended little changed, while the yuan traded onshore edged 0.1% higher against the dollar to 6.9031.

Chinese online services platform Meituan Dianping climbed 4.9% in Hong Kong after reporting a narrower first-quarter loss and a 70% jump in revenue.

Sino Biopharmaceutical added 0.6% after the Chinese drugmaker said that tablets of tenofovir disoproxil fumarate, an anti-HIV drug developed by its unit, received marketing authorization from the European Union. Offshore oil producer CNOOC fell 0.9%, while PetroChina declined 1.3% after Brent crude prices slid 4.6% overnight amid trade tensions.

Air China and China Southern Airlines rose 2.6% and 1.2%, respectively, while China Eastern Airlines ended flat on Friday. The three carriers this week asked Boeing to compensate them for losses caused by the grounding and delayed deliveries of 737 MAX aircraft, according to media reports. According to Reuters, the China Air Transport Association on Friday said it estimated that the grounding of the planes would result in losses of about 4 billion yuan ($579.3 million) for Chinese airlines by the end of June.

Boyaa Interactive International fell 4.7% following a 51.1% plunge in the online card-and-board game maker's first-quarter net profit.

Parenting website operator BabyTree Group added 0.6% after slipping as much as 3.6%. The company on Thursday said it expected to swing to a loss for the six months ending in June from a profit a year ago.

China Energy Engineering shed 2.2% even as the state-owned energy infrastructure builder said its unit received an engineering, procurement and construction contract for a hydropower project in Indonesia worth $1.5 billion.

-- Amy Lam

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