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Nikkei Markets

Hong Kong shares slip as trade and local tensions brew

ZTE slumps after report US delaying decision on Huawei

HONG KONG (Nikkei Markets) -- Hong Kong shares gave up early gains on Friday to edge lower by noon, as fresh worries over U.S.-China trade relations and protests in the city weighed on sentiment.

The Hang Seng Index slipped 0.2% to 26,073.57 by the midday lunchbreak after rising as high as 26,313.78 earlier and climbing 0.5% on Thursday. Pan-Asia insurer AIA Group declined 1.2%, contributing to more than half of the index's losses by points. Casino operator Sands China edged 1% lower ahead of its earnings for the first half. During the midday break, the company reported a 9% increase in profit for the period on a 4.8% rise in revenue.

Hong Kong rail operator MTR rose 1.1% even as it reported a 22.3% decline in profit for the January-to-June period. The stock has shed 11.5% over the past three weeks after the company issued a profit warning. Weekslong protests in Hong Kong have also occasionally disrupted its services.

China Mobile added 3.9%. The company on Thursday said it is pursuing new growth drivers to circumvent the pressure on its traditional revenue streams as it gears up for a commercial rollout of fifth-generation internet services. The comments came after it reported a 15% drop in January-to-June net profit and a 0.6% decline in revenue.

The local benchmark index opened higher after all three major U.S. equity indexes advanced 1% or more overnight, extending a recent rebound. However, concerns over Sino-American trade relations continued to weigh on investor sentiment. The U.S. is holding off on a decision about licenses for American companies to restart business with China's Huawei Technologies, after Beijing said it would halt purchases of U.S. farming goods, Bloomberg reported, citing people familiar with the matter. U.S. equity futures pointed to a weaker opening on Wall Street on Friday. Chinese telecommunications equipment maker ZTE tumbled 9.2% in Hong Kong.

The intensity of the Hang Seng Index's recent rebound was not strong, said Stanley Chik, head of research at Bright Smart Securities. "Overall, the market hasn't improved much," he said.

Chik added that he does not expect "big changes" to the three factors clouding sentiment currently -- U.S.-China trade tensions, the yuan's exchange rate and political unrest in Hong Kong.

Trade tensions escalated last week after U.S. President Donald Trump announced plans to impose import tariffs on more Chinese goods. Beijing retaliated by halting imports of U.S. agricultural produce, and allowing the yuan to weaken to below 7 to the dollar for the first time in more than a decade.

Meanwhile, investors continue to keep an eye on the anti-government protests in Hong Kong. Protesters plan to stage demonstrations at the city's airport on Friday.

In the mainland, the Shanghai Composite Index shed 0.4% after rising 0.9% on Thursday. The yuan traded onshore slipped 0.1% to 7.0502 against the dollar.

Great Wall Motor rose 2.9% in Hong Kong after reporting an 11.1% increase in sales volume for July.

Aluminum producer United Company Rusal slumped 10.2% after reporting a 41% drop in net profit for the first half of the year.

Longfor Group Holdings added 1.1% following a 16% increase in contracted sales for July.

Carnival Group International Holdings fell 7.1% after the property developer said it expects to report a loss of at least 450 million Hong Kong dollars ($57.4 million) for the January-to-June period, compared with a loss of HK$94.9 million a year ago.

Denim fabric maker Hingtex Holdings plunged 17.5% after saying it expects to report a more than 50% drop in net profit for the first six months of 2019.

-- Benny Kung

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