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Nikkei Markets

Hong Kong stocks fall to week low ahead of Fed decision

ZTE plunges 42% as trading resumes after it gets $1.4bn fine

HONG KONG (Nikkei Markets) -- Hong Kong shares fell to their lowest level in more than a week on Wednesday as investors shifted focus to the U.S. Federal Reserve's policy review following the U.S.-North Korea summit in Singapore.

The Hang Seng Index dropped 1.2% to 30,725.15, its lowest closing level since June 1. Industrial & Commercial Bank of China and China Construction Bank dipped 1.7% and 1.2%, respectively. This followed data released on Tuesday that showed showed new Chinese bank loans fell to 1.15 trillion yuan ($179.7 billion) in May from April's 1.18 trillion yuan.

Analysts polled by Reuters were expecting mainland lenders to have extended 1.2 trillion yuan in new loans.

Wednesday's losses followed two days of lackluster trade as investors stayed on the sidelines while U.S. President Donald Trump and North Korean leader Kim Jong Un met for the first time. The summit in Singapore ended with the isolated state committing to the complete denuclearization of the Korean Peninsula while the U.S. pledged to provide security guarantees.

Most equity benchmarks in the region also edged lower on Wednesday and the Nikkei Asia300 Index fell 0.7% ahead of the outcome of the Fed's two-day policy review. The U.S. central bank, which last raised rates in March, is widely expected to raise interest rates later on Wednesday.

The Fed has indicated the possibility of three increases this year, but investors are waiting to see if it will lift that forecast to four. The European Central Bank and the Bank of Japan are also conducting policy reviews this week.

"The Hang Seng Index is essentially lacking direction as people wait for rate decisions from three central banks," said Felix Man, executive director at Future Land Resources Capital Group.

Chinese telecommunications-equipment maker ZTE plunged 41.6% in Hong Kong as it resumed trading after a near two-month halt. The company agreed to pay $1.4 billion in civil penalties and make changes to its board and management to lift a U.S. ban on American companies supplying it with components. ZTE's Shenzhen-listed shares tumbled by the maximum permitted 10%.

"Today's market weakness is partly because of ZTE," Man said. "While A-share trading is limited at a 10% downside today, mainland investors will come to short-sell H-shares" in Hong Kong.

The Shenzhen Composite slid 1.6% on Wednesday while Shanghai's gauge lost 1%.

CK Hutchison Holdings declined 2.24%. A consortium including CK Asset Holdings, and CK Hutchison units CK Infrastructure Holdings and Power Assets Holdings made a $9.9 billion offer for Australian pipeline company APA Group. CK Infrastructure dipped 0.25% while CK Asset was down 0.82% and Power Assets added 0.27%. APA jumped 21% in Sydney.

Skyworth Digital Holdings advanced 6.5%. On Tuesday, the television maker said its profit for the year ended in March tumbled 58.7% year-on-year to HK$541 million ($68.9 million) even as revenue rose 8% to HK$46.26 billion. During Wednesday's trading break, Skyworth said it plans to submit a bid for land use rights for parcels of industrial and residential land in China's Quanjiao County.

Anhui Conch Cement slid 2.7% after the construction materials company on Tuesday said unit Anhui Tongling Conch Cement has suspended some production lines amid environmental concerns.

Chinney Investments added 1.9% after the property developer said it expects net profit for the year ended March 31 to rise by more than three times from the previous fiscal year.

Hon Kwok Land Investment increased 1.2% after saying its profit was expected to jump by more than four times for the year ended in March.

-- Amy Lam

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