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Nikkei Markets

Hong Kong stocks advance after sell-off amid Fed rate hopes

Shares of HNA Group companies climb after indebted group seeks provincial help

HONG KONG (Nikkei Markets) -- Hong Kong stocks on Monday recovered some of the steep losses they suffered last week amid worries over a global pandemic from the new coronavirus, with sentiment aided by expectations for a rate cut by the U.S. Federal Reserve this month.

The Hang Seng Index, which tumbled 4.3% last week, gained 0.9% to 26,371.21 by noon. China Construction Bank rose 1.9%, mobile-phone components supplier Sunny Optical Technology Group jumped 5.6%, and social media and gaming major Tencent Holdings increased 1.4%.

The gains came despite extended losses on Friday for most U.S. stocks, taking Wall Street equities deeper into a technical recession, or more than 10% below their recent highs, amid the global spread of new coronavirus infections. Traders are now penciling in a 100% chance of a 0.5 percentage point rate cut by the U.S. central bank at a review of borrowing costs later this month, compared with a zero probability of such a steep reduction just a week ago, according to the CME FedWatch tool.

"Rate futures are all pointing to a cut, but I would question if this is necessary," said Ivan Li, director for the investment research department at CSL Securities. "The support for the Hong Kong market at these levels is solid."

Stocks also rebounded in mainland trading, sending the Shanghai Composite Index 2.9% higher. The yuan traded onshore strengthened 0.3% against the U.S. dollar to 6.9688.

The Purchasing Managers' Index for China's manufacturing sector plunged in February to 35.7 from a level of 50.0 in January -- a level that separates economic expansion from contraction -- data released by the National Bureau of Statistics showed over the weekend. A private survey by Caixin/Markit separately showed the PMI slumped to 40.3 last month from a reading of 51.1 in January.

"The extensive efforts to contain the new coronavirus have caused economic growth in China to slow abruptly and are having repercussions around the world," economists at Capital Economics wrote in a report.

Shares of HNA Group companies rose after saying that the Hainan provincial government has sent a team of professionals at the indebted group's request to help it manage liquidity risks amid the economic impact from the coronavirus.

Shares of Hainan Airlines Holding rose 3.4% in Shanghai, HNA Investment Group jumped 5.4% in Shenzhen and HNA Technologies Investments Holdings soared 37.8% in Hong Kong.

New World Development retreated 1% after the Hong Kong property developer said on Friday that its net profit for the six months ended Dec. 31 plunged by more than 90% from a year earlier.

China Communications Construction surged 7.1% in Hong Kong after the company reported an 8.1% increase in the value of new contracts it secured in 2019.

Hope Education Group advanced 7% after it announced an agreement to acquire Malaysia's Inti Education Holdings, which operates one university and five colleges, for $140 million.

Sihuan Pharmaceutical Holdings Group jumped 5.4% after saying that it had recently commenced clinical research of Favipiravir tablets codeveloped with the Institute of Microbiology Epidemiology of China's Academy of Military Medical Sciences.

-- Benny Kung

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