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Nikkei Markets

Hong Kong stocks pull back after China cancels US talks

Trading activity muted because of China holiday and closure of trading links

HONG KONG (Nikkei Markets) -- Hong Kong stocks retreated on Monday after a two-week winning streak, as a new round of tariffs took effect in the Sino-American trade war and Chinese leaders called off talks with their U.S. counterparts.

The benchmark Hang Seng Index fell 1.6% to 27,499.39, with forty-eight of its 50 components dropping. Social-media major Tencent Holdings slid 2%, London-headquartered lender HSBC Holdings gave up 1.2% and China Construction Bank shed 1.7% as heavyweight stocks weighed on the market.

A 10% U.S. duty on about $200 billion of goods imported from China became effective just after noon in Beijing on Monday. Retaliatory tariffs on about $60 billion of U.S. goods bound for China were also to be introduced at the same time. The levies add to the $50 billion of tariffs that each nation has already imposed on imports from the other. China on Saturday also canceled trade talks planned with U.S. officials amid the tensions.

Furthermore, China on Friday summoned the American ambassador in Beijing to lodge a protest against the U.S. decision to impose sanctions on a Chinese military agency and officials for buying military equipment from Russia, the mainland's foreign ministry said on Saturday. China's Defense Ministry said it would recall its naval chief from a visit to the U.S. and postpone the talks planned this week between military officials.

"News that China has canceled the military talks shows the disharmonious U.S.-China relations, which has added to the negative impact on the market," said Sam Chi-yung, senior strategist at South China Financial Group in Hong Kong.

Trading activity was muted as mainland Chinese financial markets are closed for a public holiday on Monday, while the Hong Kong market will be shut on Tuesday. Less than HK$70 billion ($8.96 billion) of stocks were traded in the city on Monday.

The electronic trading link that allows mainland investors to access Hong Kong stocks is closed for most of this week and all of next week. Mainland Chinese markets, which reopen on Tuesday, will be closed for all of next week for the National Day holiday.

Several Chinese developers declined following media reports that the government has asked some provincial authorities to reconsider property presales, a practice that allows companies to generate funds from a project before its completion.

China Overseas Land & Investment gave up 3.3%, Guangzhou R&F Properties shed 3.5%, Sunac China Holdings sank 4% and China Evergrande Group lost 3.6%.

The decline for Evergrande came even as it agreed to invest about 14.49 billion yuan ($2.11 billion) in Xinjiang Guanghui Industry Investment Group in two steps that will give it a 40.96% stake in the latter. Xinjiang Guanghui has business interests in energy, vehicle sales, logistics and real estate. Shares of auto dealer Grand Baoxin Auto Group, in which Xinjiang Guanghui indirectly holds a stake, jumped 16.3%.

Geely Automobile Holdings slid 4% after announcing a licensing agreement with its parent group. Under the agreement, an affiliate of its controlling shareholder will be able to transfer intellectual properties related to three Geely vehicles to Proton Holdings, allowing the Malaysian automaker to sell them in some Southeast Asian markets. Geely, whose parent group owns nearly half of Proton, will receive 1.34 billion yuan in license fees over a five-year period.

Wing Chi Holdings dropped 5.1% to 56 Hong Kong cents. The company's controlling shareholder, owned by Chairman Li Cheuk Kam, sold 190 million shares in the company to Great Pride Global at 53 Hong Kong cents each, reducing its stake to 51.94%.

Yuexiu Transport Infrastructure slid 1.3% after a unit reported a 7.2% decline in average toll revenue for August.

-- Carrie Chen

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