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Nikkei Markets

Hong Kong shares extend losses as city unrest weighs

MTR slips after train derails in Kowloon

HONG KONG (Nikkei Markets) -- Hong Kong shares headed lower for a second consecutive day on Tuesday, with investors apparently taking profits after recent gains as the city contends with escalating political unrest.

The Hang Seng Index was down 1% to 26,849.72 by noon. Hong Kong rail operator MTR slipped 1.3% after a train leaving the city's Kowloon area derailed. No injuries were initially reported, but MTR has reportedly closed its Hung Hom station and suspended services between Hung Hom and Mong Kok East stations.

Energy producers CNOOC and PetroChina rose 0.2% each, extending gains after Monday's rally as global crude prices jumped following a weekend attack on Saudi Arabia's oil infrastructure.

The Hang Seng Index has shed 1.8% so far this week after rising 6.3% over the last two weeks following the withdrawal of a controversial extradition bill that sparked citywide protests and amid optimism over Sino-American trade relations.

"The Hang Seng Index is seeing a technical adjustment today," said Alan Li, portfolio manager at Atta Capital. "The market is not expecting more positive news right now and the index has limited upside beyond 27,200."

Anti-government protests in the city have continued even after the withdrawal, as four of the protesters' five demands remain unmet. Hong Kong Chief Executive Carrie Lam on Tuesday told reporters that a platform for public dialogue with the government will be launched next week.

Moody's Investors Service on Monday downgraded Hong Kong's ratings outlook to "negative" from "stable," citing the rising risks that the ongoing protests in the city undermine the strength of Hong Kong's institutions. Moody's affirmed its Aa2 long-term issuer rating.

Li said downside stemming from the downgraded outlook by the ratings agency was already factored in.

Meanwhile, a round of deputy-level Sino-American trade talks is scheduled to start in Washington on Thursday, the U.S. Trade Representative's office said on Monday. This is ahead of high-level talks in October, which are expected to include a meeting between U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.

The U.S. Federal Reserve, meanwhile, is widely expected to deliver this year's second rate cut on Wednesday.

In the mainland, the Shanghai Composite Index declined 1% by midday, while the yuan traded onshore rose 0.3% against the dollar to 7.0882.

Air China and China Eastern Airlines extended losses following the jump in global crude prices, even as both airlines reported increases in the number of passengers carried last month. Air China, which reported a 5.7% rise in August passenger traffic, slipped 2.6%, while China Eastern was down 2.5% despite a 6.5% advance in the metric.

Contract manufacturer of phones FIH Mobile, a unit of Taiwan's Hon Hai Precision Industry, slid 18.4% after the company's billionaire founder Terry Gou said he will not contest in Taiwan's 2020 presidential election. The stock had jumped 23.2% last week amid speculation that Gou may stand as an independent candidate.

Mainland developer China Evergrande Group slid 1.5% after Moody's lowered its outlook for the company to "stable" from "positive."

Fast-moving consumer goods company Heng Tai Consumables declined 2.1% after saying it expects loss for the full year ended June 30 to have widened from a year ago.

-- Benny Kung

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