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Nikkei Markets

Hong Kong shares slide after Beijing quarantines Wuhan

Shanghai Composite sees worst drop since May while yuan tumbles

HONG KONG (Nikkei Markets) -- Hong Kong shares fell to a one-month low on Thursday, as investors continued to fret over the spread of a deadly virus in and around China after mainland authorities quarantined the city at the heart of the outbreak.

The Hang Seng Index lost 1.5% to 27,909.12, its lowest close since Dec. 24. Mobile services operator China Unicom (Hong Kong) dropped 5.6%, leading percentage losses on the index, after its preliminary profit for 2019 missed estimates. Among heavyweights, internet services company Tencent Holdings and Ping An Insurance Group fell 1.4% and 1.6%, respectively.

Shares of airlines were under pressure in Hong Kong, with Air China declining 3.6% and China Southern Airlines down 3.5%.

Cathay Pacific Airways declined 2.1%. The airline on Thursday said it was suspending Cathay Dragon flights to and from the central Chinese city of Wuhan, where the virus originated, from Jan. 24 to Feb. 29.

The equity benchmark is on course for its first weekly decline in eight weeks as risk sentiment turned sour amid intensifying fears that a Severe Acute Respiratory Syndrome-like virus from China is spreading. Chinese state-television CCTV on Wednesday said 17 people had died from the virus, and more than 500 cases were confirmed. The virus has been detected in people in other parts of China, along with Hong Kong, Macao, Thailand, South Korea, Japan and the U.S.

Mainland authorities on Thursday halted travel from Wuhan as they attempt to contain the outbreak. The move comes a day before China closes for the weeklong Lunar New Year holiday, during which hundreds of millions of people travel, mostly within the country.

In the mainland, the Shanghai Composite Index slumped 2.8%, its worst single-day drop since May. The yuan traded onshore declined 0.4% against the dollar to 6.9287.

"Are markets overreacting? Perhaps they were underacting before the confirmation of person-to-person spread of the virus" and are playing catch-up, Simon Powell, global head of thematic research at Jefferies in Hong Kong, wrote in a note.

"I think the market is pricing in a continuation of the situation. Travel, retail and consumer sectors could be hit especially hard," said Stevan Tam, associate director at Fulbright Financial Group. "People are already wondering, maybe prematurely, if China's growth can stay at 6%."

China's gross domestic product grew 6.1% in 2019, its slowest pace in 29 years, as a bruising Sino-American trade war took a toll on economic activity.

China Molybdenum declined 4.1% in Hong Kong after saying it expects 2019 net profit to have fallen between 56.9% and 63.3% from a year ago.

Personal-care products maker Vinda International Holdings jumped 6.3% to HK$17.64, extending Wednesday's 1.7% advance, following a 75.3% surge in full-year profit. Daiwa Capital Markets upgraded the stock to "buy" from "outperform" and lifted its price target to HK$20.30 from HK$18. Nomura raised the stock's price target to HK$21.90 from HK$18.40.

Maanshan Iron & Steel, which said it expects net profit for the year ended Dec. 31 to have dropped 81.3%, fell 3.6%.

Financial services company China Strategic Holdings shed 2.9% after forecasting a loss for 2019, compared with a profit the year before.

Bright Smart Securities & Commodities Group surged 20.6% after the financial services company declared a one-off special dividend of 80 Hong Kong cents per ordinary share, payable on Feb. 28.

-- Benny Kung

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