HONG KONG (Nikkei Markets) -- Hong Kong shares fell for a second day on Monday as geopolitical tensions in the Middle East flared after the U.S. killed an Iranian general last week.
The Hang Seng Index fell 0.8% to 28,226.19 after slipping 0.3% on Friday. Among the biggest contributors to the index's losses by points, pan-Asia insurer AIA Group slid 1.1% and social media and gaming company Tencent Holdings declined 1.5%.
Energy producers advanced as Brent crude futures climbed 2.1% to $70.05 a barrel, poised for its highest close since May 28, according to Refinitiv data. PetroChina and China Petroleum & Chemical (Sinopec) rose 4% and 0.6%, respectively. Offshore oil producer CNOOC jumped 3.6% to HK$13.72. Daiwa Capital Markets raised its target price on the stock to HK$15.10 from HK$12.90 amid expectations the company will increase its production target for 2020-2021.
The Japanese yen climbed 0.1% against the U.S. dollar, while spot gold prices rose 1.3% as investors bought into safe-haven assets. The Nikkei Asia300 Index of regional companies dropped 1.1%.
Risk appetite has wavered after a U.S. airstrike on Friday killed Iranian Maj. Gen. Qassem Soleimani, leader of the Revolutionary Guards' Quds force, in Iraq. On Sunday, Iran said it no longer considers itself bound by a 2015 nuclear agreement negotiated with the U.S. and other nations. Meanwhile, Iraq's parliament voted in favor of expelling U.S. troops from the nation.
Some market participants believe reactions to the tensions are likely to be short-lived.
"I don't think it will have a long-term impact on the market," said Jason Chan, senior manager at uSMART Securities' research department. This is "an excuse to book gains. Unless the situation further worsens, the market will still go up."
The Hang Seng Index last week marked its fifth consecutive weekly advance and has been trading near five-month highs in recent sessions.
Chan noted that market reactions to geopolitical factors over the past two to three years have been "very short-term."
China's policies to support economic growth and an early signing of the Sino-American trade deal will likely be short-term catalysts for Hong Kong equities, he added.
The Shanghai Composite Index ended little changed after rising as much as 0.8% earlier. The yuan traded onshore slipped 0.1% against the dollar to 6.9744.
Meanwhile, China named Luo Huining as the Hong Kong liaison office director, replacing Wang Zhimin. The new appointment comes about seven months after anti-government protests in the city started.
Mainland property developer China Vanke slipped 1.4% after reporting a 9% decrease in December contracted sales.
Beijing Capital Land, which reported a 13% drop in December contracted sales, declined 2.2%.
Cosmetics retailer Sa Sa International Holdings added 2.9%. Data released late Friday showed retail sales in the city fell 23.6% in November, slowing slightly from October's 24.4% drop.
-- Benny Kung