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Nikkei Markets

Hong Kong shares slide most in a week following Fed minutes

China Telecom, Hengan International and Country Garden retreat after earnings

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

The Hang Seng Index dropped 0.8% to close at 26,048.72, its biggest single-day retreat in more than a week. Henderson Land Development declined 3.2% 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 decreased 1.6%, 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.

Hengan International Group slumped 5.3% after the personal-hygiene products maker reported a 3.6% fall in first-half net profit, while China Overseas Land & Investment lost 2.1% amid broad market declines despite a 7.4% increase in its half-yearly profit. China Telecom gave up 1.4% after reporting a 1.3% decline in revenue for the first half of the year amid tariff cuts and rising competition. Its profit for the period rose 2.5% from a year ago, helped by cost control measures. All three companies reported results during the midday break for trading.

Minutes of the Fed's last policy review, when it cut interest rates by 25 basis points, showed some policymakers had been in favor of keeping rates steady. Most participants viewed a quarter-point policy easing at the 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 showed.

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 ended 0.1% higher on Thursday.

Country Garden Holdings Company declined 1% despite reporting a 20.8% increase in first-half net profit during the midday break.

Electric carmaker BYD tumbled 6.6% 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 7.6% 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 surged 18.8% to 17.08 Hong Kong dollars ($2.18) 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.

Luxury hotels operator Shangri-La Asia fell 3.7% after reporting a 24.7% drop in first-half earnings. The company said it has 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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