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Nikkei Markets

Hong Kong stocks end week down as trade and drug prices weigh

Sino Biopharm and CSPC among worst hit as China's procurement program slams sector

HONG KONG (Nikkei Markets) -- Hong Kong shares ended the week lower as investor worries over trade relations between the U.S. and China were reignited by the arrest of telecommunications-equipment maker Huawei Technologies' chief financial officer.

The Hang Seng Index edged 0.4% lower to close at 26,063.76 on Friday after a choppy trading day, taking its weekly loss to 1.7%. Sino Biopharmaceutical shed 24.7% since last Friday, while CSPC Pharmaceutical Group lost 16.5%, leading percentage losses on the gauge. The drugmakers came under pressure on concern about the impact of price cuts following a bidding process under China's centralized procurement program for medicines. Sino Biopharma on Thursday said two of the group's drugs were successfully bid. Sino Biopharma and CSPC fell 7.9% and 4.3%, respectively, on Friday.

London-headquartered heavyweight lender HSBC Holdings declined 4.8% for the week, after a 1.9% drop on Friday. Reuters reported Friday that the Huawei arrest was part of a U.S. investigation into an alleged scheme to use the global banking system to evade U.S. sanctions against Iran, and the probe included whether the company used HSBC to conduct illegal transactions involving Iran.

Investors remained focused on Sino-American relations, with sentiment getting a boost on Monday after Washington and Beijing agreed to a temporary truce on their trade war following a meeting between Presidents Donald Trump and Xi Jinping at a Group of 20 summit last weekend. However, worries resurfaced after news broke of Huawei CFO Meng Wanzhou's arrest in Canada at the request of the U.S.

"It is still unclear whether the trade friction will increase," said Will Leung, head of investment strategy for Hong Kong and greater China wealth management at Standard Chartered Bank.

Leung expects the Hang Seng Index to remain volatile in December amid "fragile" market sentiment, although he does not expect a "big fall."

In the mainland on Friday, the Shanghai Composite Index edged 0.03% higher, while the yuan traded onshore was little changed against the U.S. dollar at 6.8805.

China Southern Airlines climbed 0.9% in Hong Kong on Friday after saying its controlling shareholder, China Southern Air Holding, intends to carry out an equity diversification reform.

Geely Automobile Holdings fell 1.7%. The carmaker on Thursday said November sales volume increased 0.3% on-year to 141,661 units.

China Overseas Land & Investment added 1% following a 17% increase in contracted sales for November.

China SCE Group Holdings climbed 1.5% after saying contracted sales for November more than doubled.

Chinese conglomerate CITIC added 2.7% after saying its Singapore-listed unit, CITIC Envirotech, secured two engineering-procurement construction contracts worth a total of 490 million yuan ($71.3 million).

Dye maker Tsaker Chemical Group surged 41.8% as trading resumed after a three-day halt. The company said it "vigorously denies" allegations contained in an email received by a market investor that accused it of suspicious accounting to boost profits. The shares had slumped 45.7% on Monday before trading was halted.

-- Amy Lam

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