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Nikkei Markets

Hong Kong stocks post weekly loss on geopolitics and trade woes

Oil producers and developers among biggest decliners during 5-day period

HONG KONG (Nikkei Markets) -- Hong Kong shares posted their fifth weekly loss in six weeks on Friday, as unresolved Sino-American trade matters and renewed geopolitical tensions after the U.S. called off a summit with North Korea sapped investor confidence.

The Hang Seng Index fell 0.6% to close at 30,588.04, taking its weekly loss to 1.5%. China Petroleum & Chemical, or Sinopec, was the worst performer on the index this week, dropping 10.8%, to lead energy producers on the gauge lower, as crude oil prices weakened. Mainland developers China Resources Land and Country Garden Holdings shed 5.5% and 4.9%, respectively, amid continued efforts by authorities to rein in property prices.

Lenovo Group was the week's top performer, jumping 10.9%. Company officials said at a post-earnings press briefing late Thursday that they expected Lenovo's mobile business unit to return to profit in the current financial year, while projecting revenue at its personal-computer division to grow at a double-digit rate.

In Friday's trading, Lenovo rose 6.9% and Sinopec shed 1.1%. Country Garden slid 0.4% and China Resources Land lost 0.3%.

Uncertainty over U.S.-China trade relations and the back-and-forth between U.S. and North Korean officials over the denuclearization of the Korean Peninsula have clouded global investor sentiment. U.S. President Trump on Thursday called off a June 12 meeting with North Korea's leader Kim Jong Un, citing "tremendous anger and open hostility" emanating from the isolated state. Separately, the Trump administration launched a probe into car and truck imports that may possibly pave the way for new tariffs.

For stocks in Hong Kong, the recent performance marks a stark contrast with the solid start they had in 2018, rising almost 10% in January. The city's benchmark index is now up 2.2% since the beginning of the year.

"The Hang Seng Index has been in a consolidation zone for two months, as market participants turned their focus away from blue chips and focus on mid- and small-cap stocks and hot themes," said Andy Wong, chief investment strategist at wealth management company Harris Fraser (International).

Wong added that he has been switching some Hong Kong equity positions in his client portfolios to U.S. and European stocks amid the stronger U.S. dollar and concerns of a slowdown in global growth.

"I have heard many fund managers are conserving cash and waiting for a chance in June to buy cheaper Hong Kong stocks," he said. Wong was referring to speculation that the inclusion of mainland-listed shares of Chinese companies in MSCI's indexes starting June 1 may spark a selloff in the Hong Kong-listed shares of companies with stocks trading in both places.

The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong fell 0.9% on Friday. In China, the Shanghai Composite Index lost 0.4%, while the yuan depreciated 0.2% to 6.3866 against the U.S. dollar.

Samsonite International was among the day's notable movers, falling 12.4% as trading in the shares resumed after being halted on Thursday morning. The luggage maker said allegations in a report published Thursday by short-seller Blue Orca Capital -- that it suspected Samsonite used improper accounting to inflate its financial performance -- were "misleading" and the conclusions drawn were incorrect. The company said it will provide more information in due course.

Shares of property developer Wuzhou International slumped 84.9% to 6.8 Hong Kong cents Friday morning before trading was halted. A company spokesman declined to comment on the share move.

Union Medical Healthcare rose 1.7% after saying it expects to report increases of more than 30% in both profit after tax and revenue for the year ended March 31. The medical-services provider also said it plans to establish specialist clinics in Hong Kong's Central and Mongkok districts, with a capital investment of over 100 million Hong Kong dollars ($12.7 million).

China All Access Holdings lost 2.8% as trading resumed after a two-day halt. The communications-services provider said a unit had agreed to acquire 83.33% of Qinghai Juguang High New Technology Group for up to 800 million yuan ($125.3 million). China All Access had tumbled 58.6% on Monday.

Guangdong Kanghua Healthcare declined 1.5% after saying it is in talks to acquire a controlling stake in Zhonglian Cardiovascular Hospital, a hospital already under its management.

Lee's Pharmaceutical Holdings jumped 8.8% after reporting a 51.3% surge in first-quarter net profit to HK$70.18 million as revenue rose 24.6% to HK$281.91 million.

Modern Beauty Salon Holdings slid 1.6% after saying it expects a loss for the year ended March 31, compared with a profit last year, due to a "substantial" decline in revenue.

-- Amy Lam

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