HONG KONG (Nikkei Markets) -- Hong Kong stocks fluctuated in the morning session on Friday after a four-day losing streak as investors remained cautious amid preliminary trade talks between American and Chinese officials.
The Hang Seng Index was at 26,477.11 by midday, having risen less than 0.1% from the previous day's close. Power utility CLP Holdings advanced 2.1% and heavyweight lender HSBC Holdings added 0.8%, while pan-Asia insurer AIA Group declined 1.4%.
Shenzhou International Group Holdings slid 3.9% to HK$104 ($13.3) after two of its major shareholders agreed to trim their stake in the knitwear products maker through a stake sale at HK$102 a share. AAC Technologies Holdings, an Apple supplier that had rallied earlier this week amid expectations for strong iPhone sales, declined 2.7%, trimming gains so far this week to 11.7%.
The day's moves came after the Hang Seng Index closed at its lowest level in more than two weeks on Thursday, following a 0.25-point reduction in the U.S. Federal Reserve's policy interest rate. Stocks have trended lower this week on worries about the impact of protests that have rocked Hong Kong for more than three months and uncertainty over the U.S.-China trade talks.
Deputy-level trade negotiators from China and the U.S. began in-person talks in Washington on Thursday as part of efforts by the world's two largest economies to resolve a bruising trade war. The discussions, which are expected to continue Friday, will be followed next month by a meeting of senior trade officials from both sides.
"The factors bothering the market are largely unresolved," said Larry Hung, a fund manager at China Tonghai Securities, citing the Sino-American trade frictions and political unrest in Hong Kong.
Meanwhile, the People's Bank of China earlier on Friday lowered the one-year Loan Prime Rate to 4.20% from 4.25%, in line with market expectations, while leaving the five-year LPR at 4.85%. The LPR mechanism last month became the main interest rate reference for loans in the mainland, in a move that is meant to give market forces greater say in determining borrowing costs. The LPR, based on quotations from 18 banks, will be adjusted on the 20th day of each month.
"I think monetary easing will continue, not just in the mainland but worldwide," Hung said. "Liquidity is abundant, but against the backdrop of a poor economy. If not for these easing policies, the Hang Seng Index and global equity markets wouldn't be where they are at present."
Economists at Capital Economics wrote in a report that while the reduction in the one-year LPR should nudge banks to reduce lending rates slightly, the impact on economic activity could be marginal.
"A decline of only a few basis points is small, and unlike a benchmark lending rate cut, it will only feed through to borrowing costs on new loans, not outstanding ones," they said.
The yuan traded onshore strengthened 0.1% to 7.0862 on Friday, while the Shanghai Composite Index gained 0.2%.
Shanghai Fosun Pharmaceutical (Group), an affiliate of Fosun International, advanced 2.4% to HK$23.40 after the company said its controlling shareholder had acquired an additional 1.06 million shares at an average price of HK$22.80.
Chongqing Rural Commercial Bank edged 0.2% higher to HK$4.23 after saying it will issue 1.36 billion A-shares at an issue price of 7.36 yuan ($1.04) each under a proposed A-share offering in the mainland.
-- Benny Kung