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Nikkei Markets

Hong Kong shares edge up as trade tensions closely watched

AAC, Sunny Optical and ZTE slide as US targets Huawei with sanctions

HONG KONG (Nikkei Markets) -- Hong Kong shares edged higher after a choppy morning session on Thursday, even as investors perused a U.S. move to impose sanctions on Chinese telecommunications company Huawei Technologies in the wake of rising Sino-American trade tensions.

The Hang Seng Index was up 0.2% to 28,336.91 by noon after falling as low as 28,050.78 earlier. Heavyweight lenders Industrial & Commercial Bank of China and China Construction Bank rose 1.5% and 0.8%, respectively. Ping An Insurance Group climbed 1.1% after reporting an 8.4% increase in gross premium income from life insurance and health insurance businesses for the January to April period. The three stocks contributed to more than half of the index's gains by points.

Tencent Holdings lost 0.9%. The gaming company on Wednesday reported a 17% increase in first-quarter net profit, and a 16% rise in revenue that fell short of some estimates.

Smartphone component suppliers Sunny Optical Technology Group and AAC Technologies Holdings fell 4.5% and 2%, respectively.

The U.S. Department of Commerce on Wednesday said it was adding Huawei Technologies to its Entity List, banning the company from buying components and technology from U.S. firms without government approval.

Earlier, U.S. President Donald Trump signed an executive order for a ban on the use of information and communications technology or services in the U.S. that pose "an unacceptable risk" to national security. While the order did not name any companies, it said the threats to that supply chain by foreign adversaries were a "national emergency."

Huawei on Thursday said the order will serve to harm American interests and infringe on the company's "rights and raise serious legal issues."

Chinese telecommunications-equipment maker ZTE fell 4.8%.

Meanwhile, markets were awaiting further news on Sino-American trade relations after a recent ramp-up in tensions between the two nations that culminated in Washington last week raising tariffs on Chinese goods, and Beijing announcing a plan to retaliate. Trump is expected to meet Chinese President Xi Jinping at a G-20 summit in Japan next month.

With the Huawei ban, it appears that the U.S.-China trade relationship will not improve soon, said Castor Pang, head of research at Core Pacific Yamaichi International, adding that there was "more room for the Hang Seng Index to retreat."

"Investors are risk-averse and they are likely to exit" rather than bear unnecessary risk, he said.

In the mainland, the Shanghai Composite Index had edged up 0.3% by midday on Thursday.

Air China rose 0.4% in Hong Kong after saying that passengers carried increased 2.1% in April from a year ago.

China Eastern Airlines eked out a 0.2% gain following a 2.5% increase in passengers carried last month.

China Gold International Resources fell 4.8% after saying it swung to a loss of 4.6 million Hong Kong dollars ($586,000) for the March quarter, compared with a profit of $2 million a year ago. Revenue rose 36% during the period, although total gold production fell 5% from a year ago.

Coal miner Nan Nan Resources Enterprise declined 3.2% after saying it expects to have recorded a 40% drop in gross profit for the year ended March 31.

Sichuan Expressway climbed 1.6% after the company reported a 37.5% increase in April toll income.

-- Amy Lam

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