HONG KONG (Nikkei Markets) -- Hong Kong shares headed for a fresh seven-month low on Tuesday, as concern over Sino-American tensions escalated further after the U.S. labeled China a currency manipulator.
The Hang Seng Index was down 0.7% to 25,966.59 by noon after falling as low as 25,397.35 earlier. Insurers Ping An Insurance Group and AIA Group fell 1.5% and 0.7%, respectively, contributing most to the index's losses by points. London-headquartered HSBC Holdings lost 1.5%, extending a 1.9% drop on Monday, after saying it plans to cut about 2% of its total workforce, announcing the departure of its chief executive officer and reporting earnings for the first half of the year.
With Tuesday's decline, the benchmark index was on course for its fifth consecutive fall. Investor sentiment soured late last week after U.S. President Donald Trump unexpectedly announced plans for fresh import tariffs on Chinese goods. On Monday, the Chinese yuan weakened below 7 to the U.S. dollar for the first time since 2008 after a weak daily currency fixing, prompting the U.S. to label the country a currency manipulator.
The People's Bank of China on Tuesday set its daily reference rate at 6.9683 to the dollar, stronger than the 6.9871 level analysts surveyed by Bloomberg were expecting. The yuan traded onshore rose 0.1% against the dollar to 7.0389, while the Shanghai Composite Index slid 2.4% by midday.
Meanwhile, continuing political unrest in Hong Kong kept local investors on edge. Anti-government protesters took to the streets once again on Monday, as their demands for the complete withdrawal of a now-suspended controversial extradition bill and Chief Executive Carrie Lam's resignation remain unmet.
All the unfavorable factors affecting market sentiment still remain and are keeping investors among sellers, said Ben Kwong, head of research and executive director at KGI Asia.
While weakness is likely to prevail, the "magnitude of the decline will narrow a little bit because of the oversold situation," he said, pegging support for the Hang Seng Index at 25,000 points.
Any subsequent upside because of a technical rebound would be "relatively small," he added.
The Hang Seng Index's 14-day relative strength index, a measure of momentum, has been below 30 since Friday, a signal to some technical analysts that the gauge may be oversold.
China Evergrande Group fell 1.4% in Hong Kong following a 0.5% decrease in the property developer's contracted sales for July.
Modern Land slid 3.6% after reporting a 3.6% year-over-year decrease in contracted sales for last month.
Agile Group Holdings, which reported a 6.7% drop in presales value for July, shed 1.3%.
Hotel owner and operator Shangri-La Asia fell 4.7% to HK$8.60. Daiwa Capital Markets on Tuesday downgraded the stock to "hold" from "buy" and trimmed its target price to HK$9 from HK$14, amid expectations of "very weak" first-half results.
Kiddieland International climbed 5.8% after the toy maker said it will pay a special cash dividend conditional on the completion of its unit's plan to sell its entire stake in Dongguan Kiddieland Industrial to Dongguan Shengtuo Investment for 320 million yuan ($45.6 million).
-- Suzannah Benjamin