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Nikkei Markets

Hong Kong shares extend losses after US rate cut

Standard Chartered rises after first-half profit increases

HONG KONG (Nikkei Markets) -- Hong Kong shares fell to a fresh six-week low Thursday, as investor sentiment was shaky after the U.S. Federal Reserve signaled its rate cut on Wednesday did not indicate the start of a long easing cycle.

The Hang Seng Index declined 0.8% to 27,565.70, closing at its lowest level since June 18 for a second consecutive day. Heavyweight insurer AIA Group fell 1.5%, contributing most to the index's losses by points.

CK Infrastructure Holdings was down 3.1% after reporting a profit of 5.94 billion Hong Kong dollars ($758.9 million) for the January-to-June period, which was little changed from a year earlier. Turnover for the period declined 7.1% to HK$18.07 billion. Power Assets Holdings slid 1.9% following an 8% slide in January-to-June net profit and a 13.5% decrease in revenue. CK Asset Holdings, which is expected to report half-year earnings later on Thursday, lost 3.6%.

CK Asset, CK Infrastructure and Power Assets are all members of a business empire founded by billionaire Li Ka-shing.

Most regional markets also traded lower after the U.S. central bank on cut its policy rate by 25 basis points, as was widely expected. Fed Chairman Jerome Powell at a news conference on Wednesday did not rule out further reductions, even as he indicated the move was not the start of a long easing cycle. Major indexes on Wall Street declined overnight, with the Dow Jones Industrial Average and Nasdaq composite shedding 1.2% each. The Nikkei Asia300 Index was down 0.8% on Thursday.

"The Fed, making it clear that this is an interim adjustment and not the beginning of a rate-cut cycle, is bad," said Castor Pang, head of research at Core Pacific Yamaichi International (H.K.). "We expect fund outflows to continue in the future," he said, adding that the index will gradually decline in August.

Still, many market participants anticipate one more rate cut this year. Morgan Stanley expects another 25-basis point reduction in October.

The Hong Kong Monetary Authority, the city's de facto central bank, lowered its base lending rate by 25 basis points after the Fed's rate cut.

Meanwhile, data released late Wednesday showed Hong Kong's gross domestic product in the April-June quarter grew 0.6% from a year earlier. Economists polled by Reuters were expecting growth of 1.6% for the quarter. Sequentially, GDP contracted 0.3% in the latest three-month period. The slowdown comes at a time when the city has been dealing with several weeks of widespread protests against a now-shelved controversial extradition bill.

Investors continue to keep an eye on Sino-American trade tensions. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin met with Chinese Vice Premier Liu He in Shanghai this week. The White House said China confirmed its commitment to increase purchases of U.S. agricultural products. The two countries will resume negotiations in Washington next month, it said.

In the mainland, the Shanghai Composite Index declined 0.8%, while the yuan shed 0.3% against the dollar to 6.9016. Factory activity in China contracted in July, but at a slower pace than June, according to a private survey. The Caixin/Markit Manufacturing Purchasing Managers' Index came in at 49.9 for last month from 49.4 in June. Economists polled by Reuters were expecting a reading of 49.6.

London-headquartered lender Standard Chartered rose 2.9% in Hong Kong after reporting a 10.7% year-over-year increase in underlying pretax profit for the first six months of 2019.

Building services provider Analogue Holdings slid 11.9% after saying it expects net profit for the six months ended June 30 to fall by 50%, compared with HK$216.7 million a year ago.

Aluminum products manufacturer China Zhongwang Holdings slumped 14.2%. The company's founder Liu Zhongtian was indicted by a grand jury in the U.S. for allegedly scheming with the company to evade $1.8 billion in tariffs by smuggling aluminum into America, according to media reports.

ZhongAn Online P&C Insurance jumped 12% after the Chinese online insurance company said it expects to swing to a consolidated net profit for the six months ended in June from a net loss of 655.8 million yuan ($95.2 million) a year ago.

-- Benny Kung

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