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Nikkei Markets

Hong Kong shares volatile ahead of US-China trade talks

Restaurant operators LH Group and Fairwood slide, while HSBC and CCB gain

HONG KONG (Nikkei Markets) -- Hong Kong shares headed higher after a choppy morning session on Thursday, as conflicting signals about upcoming Sino-American trade talks kept investors cautious.

The Hang Seng Index rose 0.2% to 25,729.16 by noon after changing directions at least nine times. China Construction Bank added 0.8%, while HSBC Holdings advanced 0.6%. The two financial heavyweights contributed more than half of the index's gains by points.

High-level trade talks between Chinese and U.S. officials are due to start later Thursday in Washington. U.S. President Donald Trump on Wednesday said there is a "very good chance" the U.S. and China will reach an agreement. However, relations between the two countries have soured in recent days as the U.S. imposed restrictions on visas and certain companies, and China retaliated.

Kevin Leung, executive director of investment strategy at Haitong International Securities, said he does not expect a "proper" trade deal this time, adding that he believes the trade war will likely "drag on."

Even so, "further downside for the Hang Seng Index is limited as valuations are low," he said.

Meanwhile, concerns over an ongoing political crisis in Hong Kong continued to plague sentiment, as anti-government protests stretched into a fourth month despite the government's attempt to quell unrest by invoking emergency powers. The protests, which started peacefully in June to demand the withdrawal of a controversial extradition bill, have since turned violent frequently and evolved into a wider pro-democracy movement.

The impact of the Hong Kong protests has already been priced in, Leung said.

In the mainland, the Shanghai Composite Index edged 0.2% higher.

Restaurant operator LH Group slumped 5.3% after saying it is suspending operations at three outlets in Hong Kong because of a challenging business environment.

Fairwood Holdings, which also operates restaurants in Hong Kong, declined 5% after saying it expects to report a "significant" decline in net profit for the six months ended Sept. 30.

Mining company MMG fell 6.6% after saying road access to its Las Bambas mine in Peru is currently disrupted and mining operations are likely to be affected unless certain road blockages can be removed in the next few days.

Shares of Topsports International Holdings rose 9.4% to HK$9.30 after the Chinese sportswear retailer raised 7.91 billion Hong Kong dollars ($1.01 billion) in gross proceeds from an initial public offering.

Meanwhile, Chinese software developer 360 Ludashi Holdings, which also began trading on Thursday, jumped 122% to HK$6 after raising HK$162 million from an IPO.

-- Sunny Ng

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