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Nikkei Markets

Hong Kong shares flat as China GDP pace slows to 29-year low

CSPC jumps on earnings outlook, while Cathay Pacific falls after monthly data

HONG KONG (Nikkei Markets) -- Hong Kong shares were little changed by noon after a choppy morning session on Friday as investors digested China's economic growth numbers, with gains for pharmaceutical companies countered by losses for some heavyweights.

The Hang Seng Index was down 0.04% at 28,879.29 by noon after rising as high as 29,101.50 earlier. Heavyweights diverged, with pan-Asia insurer AIA Group and social media and gaming company Tencent Holdings slipping 1.5% and 0.6%, respectively, while Ping An Insurance Group climbed 1.6%.

Sino Biopharmaceutical gained 3.2% and CSPC Pharmaceutical Group surged 6.2% amid a positive earnings outlook and investor expectations that their large drugmakers could withstand efforts by Beijing to cut cost of generic medicines because of a diversified product portfolio.

In the mainland, the Shanghai Composite Index edged 0.1% higher, while the yuan traded onshore climbed 0.1% against the dollar to 6.8697.

Data released on Friday showed China's gross domestic product grew 6.1% in 2019, the slowest pace since 1990. The reading was within the government's target of 6% to 6.5% for the year. GDP during the December quarter rose 6%, unchanged from the pace in the September quarter and in line with expectations of economists polled by Reuters and Bloomberg.

Still, some market participants believe Asia's largest economy will likely face more pain.

"We think it is premature to call the bottom of the current economic cycle," Martin Rasmussen, chief economist at Capital Economics, wrote in a note. He said easing external headwinds following the trade deal will likely be offset by "a renewed slowdown in domestic demand, triggering further monetary easing by the People's Bank."

Meanwhile, optimism over this week's formalization of a preliminary trade agreement between the U.S. and China lingered. While the Hang Seng Index has traded in a narrow 392-point range since the signing of the deal late Wednesday, it is on track for its seventh consecutive weekly advance.

Stanley Chik, head of research, Bright Smart Securities, expects the Hong Kong stock market to trade range bound after the signing of the deal.

"Especially with long holidays approaching, turnover will dwindle," he said.

Mainland markets will be closed from Jan. 24 through Jan. 30 for the Lunar New Year holiday, while Hong Kong's markets will be shut on Jan. 27 and Jan. 28.

Cathay Pacific Airways declined 2.1% in Hong Kong after reporting a 3.6% drop in total passengers carried during December.

O-Net Technologies (Group) slid 8.2% after the optical networking products maker said it expects net profit for 2019 to have decreased more than 50% from a year ago.

BII Railway Transportation Technology Holdings jumped 11.8% after the company said it expects profit for 2019 to have at least doubled from a year ago.

China Shanshui Cement Group added 7.7%. The company said it expects profit for last year to have risen "substantially" from a year ago primarily due to an increase in sales volume and selling price of cement.

China Aircraft Leasing Group Holdings added 0.8% after saying it agreed to buy 40 Airbus A321neo series aircraft. The company expects delivery of the aircraft in stages up to 2026.

-- Benny Kung

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