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Nikkei Markets

Hong Kong shares slide after US Fed minutes

Henderson Land and BYD decline, while Geely rises after earnings

HONG KONG (Nikkei Markets) -- Hong Kong shares headed lower on Thursday after minutes of the U.S. Federal Reserve's meeting showed policymakers were split last month over the rate cut, fueling concern that aggressive easing may not be in the offing.

The Hang Seng Index slipped 0.9% to 26,040.98 by noon.

Henderson Land Development declined 3.7% after saying net profit for the first half of the year halved from a year ago as revenue fell 38.1%. Pan-Asia insurer AIA Group slipped 1.7% and was the biggest contributor to the gauge's losses by points. The company is scheduled to report earnings for the January-to-June period on Friday.

Minutes of the Fed's last policy review where it cut interest rates by 25 basis points, showed some policymakers had been in favor of keeping rates steady. Most participants viewed a proposed quarter-point policy easing at this meeting as part of a recalibration of the Fed's stance, or mid-cycle adjustment, in response to the evolution of the economic outlook in recent months, the minutes read.

Currently, the probability of a 25-basis-point rate cut at the central bank's September meeting is nearly 100%, according to CME's FedWatch Tool. The probability was at 100% before the release of the minutes were released, with some even calling for a 50-basis-point cut.

"Here is the problem in a nutshell: The last rate cut was an insurance rate cut. And the minutes support that proposition," Robert Carnell, an economist at ING, wrote in a note. There is at the most another 25-basis-point or 50-basis-point cut upcoming "if you are really generous," he added.

Meanwhile, worries over Sino-American trade relations, a slowdown in global growth and political unrest in Hong Kong remained a drag on sentiment.

"The market is finding a reason to sell. At the end of the day, sentiment is rather bearish," said Michael Wong, chief investment officer at PC Securities Financial Group. "I don't think investors have confidence. The fundamentals are not turning around yet. Unfavorable factors remain."

In the mainland, the Shanghai Composite Index slipped 0.2% by midday.

Electric carmaker BYD declined 5.1% despite reporting a more than doubling of its first-half net profit on Wednesday. Daiwa Capital Markets said the company's outlook suggests a 71% to 90% drop in third-quarter net profit.

Geely Automobile Holdings jumped 5.3% after the carmaker said it plans to launch a slew of new car models, including electric vehicles, to revive its sagging sales and boost market share after weak demand and rising costs hurt its first-half earnings.

Samsonite International jumped 16% to 16.68 Hong Kong dollars ($2.13) even as net profit for the first half of the year fell 27.6% and net sales declined 5%. The luggage maker said sales have shown signs of stabilizing during the second quarter. Nomura maintained its "neutral" rating on the stock, but raised its price target to HK$15.50 from HK$15.30, citing stabilizing sales amid accelerated cost-saving initiatives.

Hotels operator Shangri-La Asia fell 6.5% after reporting a 24.7% drop in net profit for the first half of the year. The company said it started to see a significant drop in tourist arrivals in Hong Kong in July amid ongoing protests in the city.

-- Benny Kung

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