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Nikkei Markets

Hong Kong shares slide as doubts emerge on trade resolution

Rusal up after forecasting aluminum demand improvement and higher 4Q production

HONG KONG (Nikkei Markets) -- Hong Kong shares headed lower on Friday after a three-day holiday on fresh doubts that trade tensions between the U.S. and China will be resolved.

The Hang Seng Index lost 0.5% to 27,854.23 by noon after falling as low as 27,534.20 as markets reopened after the Lunar New Year holiday. Mainland markets were closed for a fifth day, and will reopen on Monday. WH Group, a pork-producer with significant operations in the U.S., was down 3% at HK$6.80, coming off an earlier low of HK$6.58. Internet services company Tencent Holdings declined 1%, also recovering from a fall of as much as 2.8%. Offshore oil producer CNOOC fell 2.7% after Brent crude prices lost 1.7% overnight.

Trading on the stock exchange was active, with stocks worth more than HK$48 billion ($6.12 billion) having changed hands by midday.

U.S. equity indexes declined on Thursday after President Donald Trump told reporters that it was unlikely he would meet Chinese President Xi Jinping before March 1, when a 90-day truce between the two nations' trade war is set to end. The comments come days after China's Vice Premier Liu He met with U.S. trade officials and Trump in Washington -- a meeting that ended with indications that further talks were likely. U.S. and Chinese officials are poised to start another round of trade talks in Beijing next week, Reuters reported, citing two people familiar with the plans.

"The Xi and Trump meeting is a very big focus for the market," said Linus Yip, chief strategist at First Shanghai Securities. "If there is any breakthrough next week, when the U.S. delegation visits China, we cannot rule out the possibility of a meeting between the two leaders."

Yip added that at current levels, the market was "inclined to be cautious." The Hang Seng Index has risen more than 6% so far this year.

Meanwhile, lingering concerns over a slowdown in China's economic growth also weighed on sentiment. Two manufacturing surveys released last week showed factory activity in Asia's largest economy contracted for a second consecutive month in January.

Yip expects investors to be more cautious toward small- and midsize A-share stocks in the near-term following a slew of profit warnings last week, while the Shanghai Composite Index likely to be stable.

United Company Rusal jumped 12.4%. The Russian aluminum producer on Friday reported a 0.4% quarter-on-quarter increase in fourth-quarter aluminum production. It said it expects aluminum demand to improve, adding that prices have upside potential.

Resorts developer Landing International Development slid 4.4% after saying it expects to have swung to a net loss for 2018 from a profit a year ago.

Innovent Biologics advanced 4% after saying it received a regulatory nod to initiate clinical trials for a drug molecule in patients with tumors.

Okura Holdings, a Japanese operator of pachinko gaming halls, added 0.9% after saying it expects to report a "significant" increase in net profit for the six months ended Dec. 31.

China Grand Pharmaceutical and Healthcare rose 3.3% after saying it entered a licensing agreement with a unit of India's Glenmark Pharmaceuticals to exclusively distribute the latter's antihistamine and steroid nasal spray product in China for 20 years.

-- Benny Kung

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