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Nikkei Markets

Hong Kong shares slide on uncertainty of trade talks outcome

Forty-eight of Hang Seng Index's constituents decline; Galaxy leads losses

HONG KONG (Nikkei Markets) -- Hong Kong shares headed lower on Friday amid renewed worries about a slowdown in global growth and uncertainty related to ongoing Sino-American trade talks in Beijing.

The Hang Seng Index had fallen 1.6% to 27,964.43 by noon. Galaxy Entertainment Group shed 4.9%, leading percentage losses on the gauge. Among heavyweights, social-media and gaming company Tencent Holdings fell 2.4%, while pan-Asian life insurer AIA Group declined 1.9%. Power utility CLP Holdings and light-rail operator MTR were the only two index stocks trading higher by midday, with each up about 0.1%.

The Dow Jones Industrial Average and the S&P 500 Index fell overnight after data showed U.S. retail sales unexpectedly fell in December, fueling worries of a slowdown in the world's largest economy. Meanwhile, lack of clarity over the outcome of trade talks between the U.S. and China also worried investors. The two countries "have made little progress so far," Bloomberg reported on Thursday, citing people familiar with discussions. The Japanese yen, considered to be a safe haven, climbed 0.2% against the dollar.

Some investors are taking profit following news that there has been little progress in trade talks, said Frankie Chan, senior research analyst at Emperor Securities. He does not expect the two nations to reach a consensus on trade before the March 1 deadline.

A round of high-level trade talks began in Beijing on Thursday and will conclude on Friday. They are being led by Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. China's President Xi Jinping is scheduled to meet members of the U.S. trade delegation on Friday, the South China Morning Post has reported, citing sources close to the matter.

News that President Xi is meeting U.S. trade representatives "actually signals that trade talks are not" getting worse, Chan said. He expects the Hang Seng Index to be frequently influenced by political volatility this year.

In the mainland, the Shanghai Composite Index fell 0.6%, while the yuan traded onshore slipped 0.1% to 6.7759 against the dollar. Data released Friday showed China's producer price inflation came in at 0.1% in January, slower than the 0.2% pace expected by analysts in a Reuters poll. Consumer inflation was at 1.7%, also slowing from December's 1.9% print.

The weaker-than-expected data is more an "excuse to sell rather than the main driver" for the weakness," he said.

BAIC Motor fell 2.3% in Hong Kong. The carmaker on Thursday said it expects net profit for 2018 to have increased by more than 95% from a year ago. Guotai Junan Securities said the estimate was below market expectations.

Great Wall Motor fell 1.7% despite reporting a 1.5% increase in January sales volume and a 6.4% rise in production. Analysts at Guotai Junan said they remain cautious as the improvement in sales relied mainly on new models, which are vulnerable when the "new vehicle effect" fades.

China Merchants Land tumbled 8.5% after saying it expects net profit for 2018 to have fallen about 25% from a year ago.

Semiconductor Manufacturing International declined 2.3% following a 44.4% decrease in fourth-quarter net profit.

Win Win Way Construction Holdings slid 8% to HK$1.26 as trading resumed after a near three-week halt. The company said its controlling shareholder had conditionally agreed to sell 312.1 million of the company's shares to CT Vision Investment at HK$0.84 apiece.

New Concepts Holdings plunged 42.1% as trading resumed after an over seven-month halt. The construction company on Thursday reported a net loss of HK$224.8 million ($28.6 million) for the year ended March 31, compared with a profit a year earlier. In a separate statement, it reported a net loss of HK$17.6 million for six months ended Sept. 30.

Property developer Winfull Group Holdings fell 0.9% after saying it expects a "significant" decline in net profit for the six months ended Dec. 31.

-- Amy Lam

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