HONG KONG (Nikkei Markets) -- Hong Kong stocks slid lower in the morning session on Monday before a new round of tariffs in the Sino-American trade war took effect, with investors also worrying about strained trade relations between the two nations after Chinese leaders called off talks with their U.S. counterparts.
The benchmark Hang Seng Index fell 1.3% to 27,603.08 by noon, with forty-five of its 50 components trending lower. Social-media major Tencent Holdings slid 1.5%, while London-headquartered lender HSBC Holdings and China Construction Bank shed 1% each as heavyweight stocks weighed on the market.
Starting at noon in Beijing, the U.S. will impose a 10% levy on about $200 billion of goods imported from China. At the same time, mainland authorities will subject about $60 billion of goods from the U.S. to import duties. The duties add to the $50 billion of levies that each nation has already imposed on imports from the other. China on Saturday also canceled 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, its 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. Around HK$38 billion ($4.87 billion) of stocks had been traded in the city by noon.
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 all of next week for the National Day holiday.
"Trading volume is expected to be low and the market will be volatile," Sam said.
Several Chinese developers declined following media reports that the government has asked some provincial authorities to reconsider property pre-sales, 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 3.8%, Sunac China Holdings sank 4.2% and China Evergrande Group lost 3.4%.
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 40.96% stake in the latter, which 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 27.2%.
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 company to Great Pride Global at 53 Hong Kong cents each, reducing its stake in the company to 51.94%.
Yuexiu Transport Infrastructure slid 1.2% after a unit reported a 7.2% decline in average toll revenue for August.
-- Carrie Chen