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Nikkei Markets

Hong Kong shares rally on extradition bill withdrawal hopes

Developers and retailers lead advances as stocks recently hit by protests rebound

HONG KONG (Nikkei Markets) -- Hong Kong shares logged their best single-day gain since November on Wednesday after local media reported the city's Chief Executive Carrie Lam was set to withdraw a controversial extradition bill that sparked months of unrest in the former British colony.

The Hang Seng Index jumped 3.9% to 26,523.23, the gauge's best single-day performance since November and highest close since Aug. 2. Stocks hit hard by the monthslong anti-government protests surged after the South China Morning Post and other media reported that Lam will likely formally withdraw the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill 2019 Wednesday afternoon. The legislation would have allowed the extradition of residents to places including mainland China.

Property developers Sun Hung Kai Properties and Henderson Land Development jumped 9.8% and 8.7%, respectively. Worries over a decline in property prices and commercial rents in one of the world's most expensive real estate markets have pressured local developers' stocks since June.

Retail stocks, which also took a hit amid a drop in tourist arrivals in the city, rallied as well. Chow Tai Fook Jewellery Group rallied 9.7%, while cosmetics retailer Sa Sa International Holdings jumped 17.3%.

Hong Kong light rail operator MTR ended 6.4% higher. A number of stations operated by the company have been damaged, and the company's services occasionally disrupted, over the last three months.

Cathay Pacific Airways, another company severely affected in the aftermath of the protests, rose 7.2%. The company had in August replaced its Chief Executive Officer Rupert Hogg and Chief Customer & Commercial Officer Paul Loo, days after a Chinese regulator issued a safety risk warning to the Hong Kong carrier over its management of staff who had participated in the city's mass protests.

The news reports on Wednesday follow 13 weekends of political unrest. Protesters initially took to the streets peacefully in June to demand the withdrawal of the bill.

While Lam announced the suspension of the bill on Jun. 15, days after an estimated million activists staged a protest around the city's government buildings, the protests have since then evolved into a movement for greater rights. The protesters' list also includes demands that officials cancel the description of the movement as a riot, drop charges against protestors, conduct an independent committee to investigate police actions during recent clashes, and grant universal suffrage.

Francis Lun, chief executive at Geo Securities, described the day's rally as "irrational exuberance."

"A mere withdrawal has no use. Protesters are asking for democracy, and asking it of China's Communist Party. This is not solving the issue," Lun said. "When everyone wakes up to this, the Hang Seng Index will drop."

In the mainland, the Shanghai Composite Index rose 0.9%. A private survey that showed services activity in China picked up last month. The Caixin/Markit services Purchasing Managers' Index coming in at 52.1. That was higher than July's 51.6 reading. A figure above 50 indicates expansion.

Investors continued to watch for news on when the U.S. and China might schedule their next round of trade talks. U.S. and Chinese officials are "struggling" to agree on the schedule for a planned meeting this month to continue trade talks, Bloomberg reported earlier this week, citing people familiar with the discussions.

Chinese property developer Country Garden Holdings added 6.1%, following a 49.5% jump in contracted sales for August.

Mainland property developer China Vanke added 3% after reporting a 15.1% increase in contracted sales for last month.

China Evergrande Group rose 3.2% following an 18.8% advance in August sales.

Future Land Development Holdings climbed 3.6%. The developer on Tuesday said August contracted sales rose 3.5% year-on-year.

-- Benny Kung

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