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Nikkei Markets

Hong Kong shares flat after US-China trade deal

GAC Group slides after saying it will not invest more than $150 million in Nio

HONG KONG (Nikkei Markets) -- Hong Kong shares were little changed on Thursday, as investors digested details of the first phase of a Sino-American trade deal that was signed on Wednesday after months of anticipation.

The Hang Seng Index was down less than 0.1% to 28,752.32 by noon after trading in a 278-point range. Mainland lenders Industrial & Commercial Bank of China and China Construction Bank declined 1.2% and 0.6%, respectively, while London-headquartered bank HSBC Holdings edged 0.3% higher.

The U.S. and China on Wednesday signed the first phase of a trade agreement in Washington, officially halting a bitter spat between the world's largest economies that has gone on for about 18 months. Both nations indicated their plans for this agreement late last year, boosting global risk appetite. The Hang Seng Index rallied 7% in December, while U.S. equities have repeatedly soared to record highs in recent weeks.

The deal involves a pledge by the U.S. to halve an existing 15% tariff on Chinese imports worth $110 billion and a suspension of planned duties on about $162 billion worth of goods from China. In exchange, Beijing has said it will buy an additional $200 billion in U.S. goods across 2020 and 2021. The agreement does not involve China lowering or removing existing tariffs on U.S. goods, and leaves in place U.S. levies on about $370 billion worth of Chinese goods.

The two sides are now expected to begin negotiations on the next phase of an agreement, involving issues that are seen as more contentious.

"I think people have mostly digested the good news, and the atmosphere is getting better," said Banny Lam, head of research at CEB International. "People expect trade talks to improve in further negotiations, but the second phase will likely be delayed."

He said focus will now shift to China's economic growth and expectations for monetary and fiscal stimulus.

China is scheduled to report gross domestic product data for 2019 on Friday. Growth in Asia's largest economy slowed to its weakest pace in nearly three decades during the September quarter.

In the mainland, the Shanghai Composite Index declined 0.3% by midday. The yuan traded onshore was up 0.1% against the dollar at 6.8842.

Guangzhou Automobile Group fell 3.6%. The Chinese carmaker on Thursday said it was in talks with New York-listed electric vehicle maker Nio about a financing proposal, but it does not expect the total amount of its investment in the company to exceed $150 million. The statement came after media reports said Nio was in talks for up to $1 billion in funding.

China Yongda Automobiles Services Holdings added 6.2% after saying it plans to buy a Mercedes-Benz 4S dealership in Shanghai for 258 million yuan ($37.4 million).

Chinese telecommunications company ZTE rose 0.4% after announcing an A-share subscription agreement consisting of 381.1 million shares at 30.21 yuan each. The company will raise gross proceeds of about 11.51 billion yuan from the deal. ZTE's Shenzhen shares were up 1.7% at 37.56 yuan as of midday.

Financial services company Innovax Holdings jumped 8.3% after saying its unit is buying 5 million shares in Hong Kong-listed Taizhou Water Group for about 20.6 million Hong Kong dollars ($2.65 million). Taizhou Water shares fell 2.2%.

-- Benny Kung

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