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Nikkei Markets

Hong Kong shares hit four-week low on Moody's downgrade

Mainland China shares and yuan skid as worries over virus intensify

HONG KONG (Nikkei Markets) -- Hong Kong shares slumped on Tuesday, as sentiment turned sour after Moody's Investors Service downgraded the city's rating and as concerns mounted over the spread of a deadly virus in and around China.

The Hang Seng Index tumbled 2.8% to 27,985.33, its lowest close since Dec. 24. Social media and gaming heavyweight Tencent Holdings declined 2.7%. Chairman Pony Ma sold about 5 million shares in the company between Jan. 14 and Jan. 17, according to filings with the Hong Kong Stock Exchange. Among other major contributors to Tuesday's drop, insurers AIA Group and Ping An Insurance Group slid 3.4% and 4.3%, respectively.

In the mainland, the Shanghai Composite Index declined 1.4%. The yuan traded onshore tumbled 0.6% against the dollar to 6.9081. Worries over the spread of a new coronavirus that originated in the central Chinese city of Wuhan intensified after authorities on Tuesday confirmed the virus has killed four people and can spread from person to person. The virus has also been detected in people in Japan, Thailand and South Korea.

Mainland carriers Air China and China Southern Airlines fell 5.9% and 6.5%, respectively, after sliding 5% or more on Monday. Casino operators Galaxy Entertainment Group and Sands China shed 3.6% and 3.2%, respectively, amid worries they will see a drop in footfall especially during the upcoming Lunar New Year holiday.

Meanwhile, Moody's on Monday lowered its rating on Hong Kong to Aa2 from Aa3, saying the government's response to political demands and broader concerns about living standards in the city has been "notably slow, tentative and inconclusive."

The downgrade comes at a time when anti-government protests in the city are entering their eighth month, as activists demand broader democratic rights. Moody's had lowered its ratings outlook for Hong Kong in September.

Tracy Chan, an analyst at KGI Asia, said the sell-off, triggered by a series of negative events, was an adjustment ahead of the long weekend. "The outlook is still good," she said.

"Today we have more bad news than usual. People are less motivated to buy and we expect a suspension of gains around this time of year," she added.

China Unicom (Hong Kong) fell 3.5% after the company said it lost a net of 2.79 million mobile billing subscribers in December.

Chinese life science research consumables maker BBI Life Sciences jumped 10.3% to HK$3.32 after saying LJ Family, owned by its major shareholders, has proposed to take the company private at HK$3.50 a share.

Century Group International Holdings rose 1.9% after saying it was establishing a new unit in Hong Kong which will include a construction business.

-- Benny Kung

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