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Nikkei Markets

Hong Kong stocks fall for third week amid global trade fears

Casino shares tumble amid weaker than expected Macau revenue growth

HONG KONG (Nikkei Markets) -- Hong Kong stocks completed a third straight week of declines on Friday as global trade tensions kept investors worried.

The Hang Seng Index slipped 0.3% over the week. The gauge inched up less than 0.1% to end at 30,492.91 on Friday after a choppy trading session.

Meat producer WH Group sank 6.7% over the week and China Merchants Port Holdings gave up 2.2% ahead of the start of another round of bilateral trade talks between China and the U.S., set to begin on Saturday.

Casino operators were among the week's worst performers, with Sands China losing 4.3% and Galaxy Entertainment Group sliding 2.3%. Macau government data released on Friday showed gross gaming revenue in the city rose 12.1% in May from a year ago, a slower pace of growth than expected.

Landing International Development, which operates a casino resort in Jeju, South Korea and is developing one in Manila, fell 40% after announcing a reverse stock-split that it said would make its shares more attractive to institutional investors.

In Friday trading, Sands tumbled 4.2%, Galaxy slumped 3.2% and Landing fell 13.7%. Outside of gaming, WH Group dropped 0.6% and China Merchants Port declined 0.5%.

Stocks struggled for direction on Friday after the U.S. government imposed tariffs on steel and aluminum imports from Canada, Mexico and the EU. Canada and Mexico retaliated with duties of their own on shipments from the U.S. while the EU edged toward implementing its own measures. Earlier in the week, the U.S. said it would also push ahead with tariffs on $50 billion worth of Chinese imports.

"This is the first time that the Trump administration has imposed meaningful tariffs on imports from these major trading partners. Consequently [Thursday's] announcement marks a notable shift in policy," analysts at Nomura wrote in a report. "Moreover, this comes at a time of increased U.S.-China trade tensions with Commerce Secretary Ross' upcoming trip to Beijing."

While markets were on edge over the prospect that the moves and countermoves might escalate into a global trade war, some said any economic impact could potentially push back interest rate increases by the U.S. Federal Reserve, to the benefit of riskier assets.

"Investors are getting used to Trump's decisions," said Steven Leung, executive director at UOB Kay Hian in Hong Kong. "If the Fed shows a more dovish attitude, this would be more positive to the stock market in the second half of June."

There is a more than an 88% probability that the Fed will lift its benchmark interest rate by 0.25 percentage points at its policy meeting later this month, according to CME's FedWatch tool.

The Shanghai Composite Index fell 0.7% on Friday and the Shenzhen Composite Index lost 1.2% when the keenly awaited inclusion of yuan-denominated shares in MSCI's global indexes took effect.

Leung said it was unlikely that a large amount of foreign capital will flow into Chinese domestic shares in the short term and that money flows over the longer term will depend on "China's fundamental factors."

China First Capital Group, which has been added to the MSCI Emerging Markets Indexes and the MSCI China All Shares Index, plummeted 38.7% and was the biggest decliner on the Hong Kong stock exchange's main board. The stock is still up more than 59% this year.

Department store operator Lifestyle International Holdings, which was added to MSCI's global small-cap indexes, plunged 28.5%, following a 43.3% surge on Thursday.

Luggage maker Samsonite International jumped 9.9% as trading resumed after the company announced that Chief Financial Officer Kyle Francis Gendreau would replace Ramesh Tainwala as chief executive and the company further responded to allegations by short-seller Blue Orca Capital. In a detailed rebuttal, the company said on Friday that Blue Orca's charges were one-sided and misleading.

China Grand Pharmaceutical & Healthcare Holdings added 0.3% after a unit agreed to acquire Shanghai Winguide Huangpu Pharmaceutical for about 1.55 billion yuan ($241.8 million).

Future Land Development Holdings climbed 5.2% to HK$6.47. Citigroup initiated coverage on the developer with a buy rating and a price target of HK$10.80, citing an upbeat sales outlook and optimism over its investment property pipeline portfolio.

Shares of port operator Tian Yuan Group Holdings closed at 75 Hong Kong cents, below its initial public offering price of 85 Hong Kong cents, as they began trading following a 150-million-share issue.

Shares of MS Group Holdings, which makes products for feeding babies, gave up most of its early gains to finish at HK$1.38 on its trading debut. The stock rose as high as HK$1.84 earlier, from its IPO price of HK$1.34.

-- Carrie Chen

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