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Nikkei Markets

Hong Kong shares edge higher after US eases Huawei restrictions

CSPC Pharma and Sino Biopharma slip ahead of quarterly earnings

HONG KONG (Nikkei Markets) -- Hong Kong shares edged higher after a choppy morning session on Tuesday, even as investors digested Washington's move to ease restrictions on China's Huawei Technologies.

The Hang Seng Index was up 0.2% to 27,848.79 by noon after changing direction at least nine times. Internet services heavyweight Tencent Holdings rose 1.3% following a 3.9% tumble on Monday.

Drugmakers CSPC Pharmaceutical Group and Sino Biopharmaceutical fell 0.6% and 0.8%, respectively, ahead of their first-quarter results. During the break, CSPC reported a 28.8% increase in March-quarter net profit and a 25.6% rise in revenue.

Sunny Optical Technology Group extended recent losses, slipping 0.1% by the noon break. The stock has lost 19.2% over the previous three trading days after the U.S. added its customer Huawei Technologies to a list of companies banned from buying components and technology from U.S. companies without government approval. Also last week, U.S. President Donald Trump signed an executive order to ban the use of information and communications technology or services that pose "an unacceptable risk" to national security.

However, the U.S. government on Monday temporarily eased trade restrictions on Huawei, allowing the company to purchase U.S.-made goods to maintain existing networks and provide software updates to existing handsets until Aug. 19. Google on Sunday suspended business with Huawei that would cause the smartphone maker to lose access to updates of the Android operating system.

The U.S. government's announcement is "relatively positive" news, the "silver lining in a very pessimistic situation," said Jason Lee, vice president for stocks at Hong Kong consultancy Investment Strategy Institute. "The rebound will likely be short-lived as fresh negative news comes out every day."

Chinese telecommunications equipment maker ZTE, which has shed 13.9% over the last three trading days, climbed 5.3% by midday on Tuesday.

Meanwhile, China's ambassador to the European Union, Zhang Ming, told Bloomberg in an interview that Beijing could retaliate against the U.S. move to blacklist Huawei.

In the mainland, the Shanghai Composite Index rose 1.5% by midday, while the yuan traded onshore rose 0.1% to 6.9017 against the U.S. dollar.

Smartphone components supplier Q Technology Group rose 4% to HK$5.96 in Hong Kong. The company said its controlling shareholder, He Ningning, bought a total of 300,000 company shares on May 20 at an average price of HK$5.72 apiece, while Executive Director Hu Sanmu bought 50,000 shares at an average price of HK$5.70 apiece.

Chinese smartphone maker Xiaomi added 1.3% after the company swung to a profit in the first quarter, compared with a loss in the year-earlier period. Revenue during the quarter rose 27.2%. Daiwa Capital Markets said the company's adjusted net income and revenue beat market expectations.

Pork producer WH Group, which has significant interests in the U.S., added 1.8%. The Mexican government on Monday announced plans to abolish a 20% retaliatory tariff on U.S. pork, effective immediately, according to Guotai Junan International. The "tariff cancellation from Mexico is estimated to boost demand for U.S. pig-rearing and pork and their prices, and hopefully can boost WH Group's U.S. animal-rearing business' margin," the brokerage said.

Imagi International Holdings jumped 7.5% as trading resumed after a halt on Monday. The company said it entered an agreement for the possible acquisition of Les Ambassadeurs Club at an initial consideration of 128 million pounds ($163 million). The target company operates a private club in London.

VTech Holdings fell 1.9% following a 17% decrease in the cordless phone and electronic toy maker's net profit for the full year ended March 31.

-- Amy Lam

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