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Nikkei Markets

Hong Kong shares flat after China's RRR cut

Geely climbs after August sales fall at smaller rate than in July

HONG KONG (Nikkei Markets) -- Hong Kong shares were little changed by noon on Monday, as investors digested the People's Bank of China's move to cut its reserve requirement ratio amid lingering expectations of more supportive measures.

The Hang Seng Index edged 0.1% lower to 26,669.38 by noon after changing directions at least five times. Heavyweight Tencent Holdings slipped 0.6%, while Sino Biopharmaceutical shed 4.4%.

Mainland lenders China Construction Bank and Industrial & Commercial Bank of China rose 0.7% and 0.4%, respectively.

China's central bank late on Friday announced a reduction in the amount of cash banks must hold as reserves by 50 basis points for all lenders. The reserve requirement ratio cut was the third such reduction this year after the PBOC's move in January to lower the rate by 100 basis points in two tranches.

China's cabinet last week said it will make "timely use" of broad and targeted RRR cuts for banks. Expectations for fiscal support from Beijing have grown in recent months as China contends with the effects of a bruising trade war with the U.S.

The RRR cut was already factored in by the markets, but there are expectations that Beijing will relax policies further, said Thomas Fung, chief investment officer at China Rise Securities Asset Management.

Data released on Sunday showed China's exports fell 1% in August from a year ago, while imports slid 5.6%. Economists polled by Reuters anticipated exports to have risen 2%. Imports were expected to have shrunk 6%.

In the mainland, the Shanghai Composite Index added 0.4% by midday on Monday, while the yuan traded onshore declined 0.2% to 7.1236.

There have been net capital inflows into H-shares this month from China, "but probably foreign investors are selling more on worries about local events," Fung said.

Unrest in Hong Kong continued for a 14th consecutive weekend despite a move by the city's chief executive last week to withdraw a controversial extradition bill that has triggered mass protests in the city. The withdrawal only met one of the activists' five demands, and pro-democracy activists have said it was "too little, too late."

Meanwhile, data on Friday showed U.S. nonfarm payrolls rose by a smaller-than-expected 130,000 jobs in August. The U.S. Federal Reserve is widely expected to lower interest rates at its policy review next week.

Geely Automobile Holdings added 4.1%. The automaker on Friday reported a 19% decline in total sales volume for August. Daiwa Capital Markets maintained its "buy" rating on the stock, noting that the sales decline narrowed from July's 24% drop. The brokerage firm said it expects the industry to recover in the second half of the year.

Information technology company Sunevision Holdings advanced 5.4% after reporting an 11% increase in net profit and a 19% jump in revenue for the full year ended in June.

Midea Real Estate Holding climbed 2.3% following an 18.1% increase in contracted sales for August.

-- Benny Kung

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