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Nikkei Markets

Hong Kong stocks post weekly loss on unrest and Fed worries

Property developers among the biggest decliners over the five-day period

HONG KONG (Nikkei Markets) -- Hong Kong stocks completed their biggest weekly loss in six weeks on Friday amid lingering worries over protests in the city and concern the U.S. Federal Reserve might hold off from further interest rate cuts this year.

The Hang Seng Index dropped 3.4% during the week, its biggest decline for any week since the period ended Aug. 9. Geely Automobile Holdings was the biggest decliner on the 50-stock index, shedding 7.8% during the week. Property developers were among the other notable losers, with CK Asset Holdings sliding 5.3% and Hang Lung Properties retreating 4.7%.

The benchmark index slipped 0.1% to 26,435.67 on Friday, following losses every day this week. Geely gave up 3.3%, CK Asset lost 2.4% and Hang Lung ended little changed.

Shenzhou International Group Holdings slid 3.9% to HK$104 ($13.3) on Friday 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 2.6%, trimming gains for the week to 11.8%.

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 key interest rate. Projections by the Fed's officials have signaled there is less chance the bank will make further interest rate cuts this year. Stocks also trended lower this week on worries about the impact of protests that have rocked Hong Kong for more than three months and uncertainty over 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 on 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 on 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 7.0874 on Friday, while the Shanghai Composite Index gained 0.2%.

Chinese infrastructure companies advanced in Hong Kong after the Central Committee of the Communist Party of China and the State Council said that building a powerful transportation network was of strategic importance for the country. Shares of China Railway Group and China Railway Construction Group both climbed 3.4%.

Shanghai Fosun Pharmaceutical (Group) advanced 2% to HK$23.30 after the company said its controlling shareholder had acquired an additional 1.06 million shares at an average price of HK$22.80.

-- Benny Kung

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