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Nikkei Markets

Hong Kong stocks hit three-week low as IPOs absorb liquidity

Geely Auto shares slide after carmaker issues a profit warning

HONG KONG (Nikkei Markets) -- Hong Kong shares dropped to a three-week low on Tuesday, weighed down by concerns that new listings were soaking up market liquidity as well as expectations for a smaller interest rate cut in the U.S.

The benchmark Hang Seng Index lost 0.8% to 28,116.28. Geely Automobile Holdings fell 3.8%, leading decliners in percentage terms, after the Chinese carmaker said it expects first-half net profit to fall about 40% from a year earlier. Pork producer WH Group and mobile phone parts maker AAC Technologies Holdings shed 3.2% and 2.8%, respectively.

Initial public offerings currently under way in Hong Kong and mainland China have been absorbing market liquidity or even leading some to sell shares to raise money for subscriptions, market participants have said.

Budweiser Brewing Company APAC, the regional arm of Anheuser-Busch InBev, is currently taking subscriptions for its $9.8 billion IPO in Hong Kong. The offer will be open until noon on Thursday. At the same time, more than 20 companies are expected to list their shares on a new Nasdaq-style board in Shanghai later this month.

In addition to tightened market liquidity, dimmed expectations for a rate cut of as much as 50 basis points by the U.S. Federal Reserve, and uncertainty over the U.S.-China trade conflict, also contributed to the market weakness, according to Kenny Wen, a wealth management strategist at Everbright Sun Hung Kai.

While American and Chinese negotiators are set to speak this week to revive stalled trade talks, previous disagreements between the two sides "threaten to bog down discussions," The Wall Street Journal reported.

In mainland, the Shanghai Composite Index dropped 0.2%, extending its 2.6% tumble on Monday.

Tian Chang Group was among the notable movers in Hong Kong, soaring 46.6% after saying it expects its net profit for the six months ended Jun. 30 to have jumped at least 14 times from a year ago, driven by increased production capacity and higher new product sales.

Entertainment services provider Camsing International Holding plunged 26.7%, after Chinese wealth manager Noah Holdings said in a statement on Monday that a fund house affiliated with it had provided financing of about 3.4 billion yuan to third-party companies related to Camsing. Noah said the fund house, Shanghai Gopher Asset Management, has started "various legal actions." Tuesday's drop came on top of an 80.4% crash in Camsing's shares on Monday, after the company said its Chairman and controlling shareholder Lo Ching was being held in criminal custody in Shanghai for unknown reasons.

Suncity Group Holdings tumbled 19.7% after Chinese media Economic Information Daily on Monday ran a report that linked the company to facilitating online gambling by players in the mainland. The decline came even as the company said in a statement late on Monday that it was a licensed junket operator in Macau, and that it does not operate an online gaming business.

Huanxi Media Group gained 5.5% after saying it expects to have swung to a profit in the six months ended Jun. 30, from a loss a year earlier.

Kingboard Holdings dropped 7.2%, after the laminates manufacturer said it expects a 60% to 65% fall in reported net profit for the half year ended Jun. 30.

Chinese yarn and fabric manufacturer Weiqiao Textile lost 3.9% after saying it anticipates a "significant decrease" in operating results for the first half.

China Maple Leaf Educational Systems dropped 3.3% to HK$2.95. Citigroup cut its target price for the private school operator to HK$2.80 from HK$3.30, citing tightening regulation.

-- Amy Lam

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