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Nikkei Markets

Hong Kong shares extend losses as trade worries persist

City's developers fall further, with demonstrations weighing on confidence

HONG KONG (Nikkei Markets) -- Hong Kong shares headed for a second consecutive day lower on Thursday, tracking weakness across the region amid persistent uncertainty over U.S.-China trade relations.

The Hang Seng Index had fallen 0.9% to 27,072.99 by noon. Heavyweight Tencent Holdings fell 1.8%, while financial companies AIA Group and HSBC Holdings declined 1.3% and 1.2%, respectively. The three stocks contributed to about half of the index's losses by points.

Trading volumes in the city appeared to be returning to normal, with turnover on the main board at 44.43 billion Hong Kong dollars ($5.68 billion) by noon after trading activity on Wednesday was affected by protests that restricted mobility in the city's financial district. The demonstrations were against a controversial bill that would allow people to be extradited to other jurisdictions, including mainland China.

Hang Lung Properties declined 2.2% after falling 2.3% on Wednesday, while Sun Hung Kai Properties slid 1.4% and New World Development shed 1.6%. Bank of America Merrill Lynch said increased political uncertainties were likely responsible for the weakness in property stocks, adding that the Sino-American trade war and any potential change of U.S. policy toward Hong Kong were also factors.

The U.S. earlier this week expressed "grave concern" over the extradition bill, and said it puts the city's special status at risk.

The protests are having a "confidence impact" on Hong Kong property stocks, said Andy Wong, chief investment strategist at LW A.M. "I would rather be defensive and avoid buying right now."

The Hong Kong interbank offered rate, or HIBOR, with a one-month tenor, rose to 2.63% on Thursday, its highest level since October 2008. Bank of America said the rise in HIBOR "in and of itself" is unlikely to impact homebuyer sentiment.

Meanwhile, concerns over U.S.-China trade relations lingered as investors awaited a likely meeting between U.S. President Donald Trump and Chinese President Xi Jinping at a Group of 20 summit later this month. U.S. equity indexes declined on Wednesday.

In the mainland, the Shanghai Composite Index edged 0.1% higher, while the yuan traded onshore slipped 0.1% against the dollar to 6.9211.

Geely Automobile Holdings declined 1.9% in Hong Kong after the Chinese carmaker said its unit entered into an agreement with South Korea's LG Chem to form a joint venture, which will engage in production and sales of batteries for electric vehicles.

Other carmakers listed in the city also fell amid broad market losses, and after data on Wednesday showed passenger car sales in China slumped 17.4% in May from a year earlier as auto companies cut production amid a prolonged weakness in demand.

Guangzhou Automobile Group fell 1.2%, while Great Wall Motor slid 4.5% and Dongfeng Motor Group lost 1.6%.

China Life Insurance declined 2.8% despite reporting a 4.7% increase in accumulated premium income for the January to May period.

Kingston Financial Group slid 1.9% after saying it expects to report a "significant" decline in net profit for the year ended March 31.

Decorative construction materials distributor Rykadan Capital jumped 7.1% following a more than tenfold increase in profit for the full year ended March and a more than doubling of its revenue.

-- Amy Lam

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