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Nikkei Markets

Hong Kong stocks sink as Huawei CFO's arrest hurts sentiment

Drugmakers plunge after prices of some drugs procured via state program slump

HONG KONG (Nikkei Markets) -- Hong Kong shares suffered their steepest loss in six weeks on Thursday as news that Chinese telecommunications-equipment major Huawei's chief financial officer was arrested in Canada at the request of U.S. authorities renewed concerns about Sino-American relations.

The Hang Seng Index gave up 2.5% to 26,156.38. Drugmakers and technology stocks were among the worst hit. Sino Biopharmaceutical plummeted 16% and CSPC Pharmaceutical Group sank 14.5% as stocks across the sector tumbled after state-owned media reported that the results of a centralized procurement process for medicines in China showed steep cuts in the prices of some drugs.

Social-media and gaming major Tencent Holdings tumbled 5.2%, while mobile-phone component makers AAC Technologies Holdings and Sunny Optical Technology Group lost 5.6% and 5.5%, respectively.

Chinese telecommunications equipment maker ZTE retreated 5.9%, while personal-computer maker Lenovo Group slipped 0.9%.

Meng Wanzhou, CFO of unlisted Huawei and daughter of its founder Ren Zhengfei, was reportedly arrested in Vancouver on Dec. 1 on suspicion the company violated U.S. sanctions on Iran. U.S. authorities are seeking extradition for her appearance before a federal court in New York, The Wall Street Journal reported, citing people familiar with the matter.

The news comes days after Washington agreed to hold off on raising tariffs on $200 billion worth of Chinese goods for 90 days, following a meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the Group of 20 summit in Argentina. The Nikkei Asia300 Index was down 2.4%.

The detention is "renewing pessimism on China-U. S. trade talks," said Jason Chan, vice head of research at Bright Smart Securities in Hong Kong and likely leading to worries about "a further deterioration in the China-U. S. relationship." The outcome of the 90-day negotiation period is "very unsure," and the market is less hopeful China will make concessions following the Huawei incident, he added.

U.S. equity futures were pointing to a weaker opening on Wall Street after being closed on Wednesday in observance of a national day of mourning for President George H.W. Bush, who died on Friday. Dow Jones Industrial Average futures were down more than 300 points by late afternoon in Asia.

In the mainland, the Shanghai Composite Index gave up 1.7% while the yuan traded onshore lost 0.5% to 6.8868 against the dollar.

Hopewell Holdings surged 30.6% to HK$34.55 ($4.42) in Hong Kong as shares began trading after a three-day halt. The company said Petrus HK has proposed to take the company private at HK$38.80 per share in cash.

Property developer Sunac China Holdings fell 1.9% after reporting a 9% decline in contracted sales for November from a year ago.

Beijing Capital Land slipped 1.6% following a 7.2% decrease in last month's contracted sales.

Packaging products maker Huajun International Group surged 56% after saying its unit agreed to acquire two companies engaged in solar module manufacturing for a total of 504.7 million yuan ($73.3 million).

I-Cable Communications jumped 9.3% after the television services provider said a unit entered a network development agreement with China Mobile Hong Kong, a unit of China Mobile. The agreement, which is for 20 years, also gives CMHK the option to renew it for five more years. China Mobile shares were down 0.1%.

-- Amy Lam

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