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Nikkei Markets

Hong Kong stocks slump 3.5% as rout spreads from US through Asia

BAIC Motor sinks as BMW plans to take majority stake in Brilliance joint venture

HONG KONG (Nikkei Markets) -- Hong Kong shares tumbled the most in eight months on Thursday, with Chinese technology companies among the hardest hit, as a global equity rout originating in the U.S. amid fears about the trade war and the economy spread to the region.

The Hang Seng Index slid 3.5% to 25,266.37. Social-media major and market heavyweight Tencent Holdings tumbled for a 10th straight day, dropping 6.8%. Smartphone components suppliers AAC Technologies Holdings and Sunny Optical Technology Group retreated 7.3% and 6.2%, respectively.

The losses were spread wide, with only seven of the Hang Seng Composite Index's 493 constituents trading higher as the index sank 4.1%. At about 140 billion Hong Kong dollars ($17.86 billion), daily turnover on the local stock exchange was heavy relative to the recent past.

Some of the other regional markets were hurt as bad, or worse. The Nikkei Asia300 Index of stocks outside Japan sank 4.1%, while Japan's Nikkei 225 Average tumbled 3.9%. In the mainland, the Shanghai Composite plunged 5.2% for its worst day in almost four years. Most regional currencies weakened against the dollar, with the Indonesian rupiah dropping 0.2% and the yuan traded onshore slipping 0.1%, while Brent and Nymex crude oil contracts each slid more than 1.5%.

Overnight in the U.S., both the S & P 500 Index and the Dow Jones industrials suffered their worst single-day drop in eight months, while the technology-heavy Nasdaq composite fell 4.1%, the most in more than two years. The yield on 10-year U.S. Treasury notes climbed toward recent multiyear highs intraday before giving up some gains by the end of trade.

Rising borrowing costs in the U.S. have fueled concerns about a flight of capital from Asia recently. Portfolio outflows from emerging market equities have amounted to about $6.6 billion since Oct. 3, the Institute of International Finance said in a report Thursday, adding that the bulk of sales happened in China, Taiwan, South Korea and India.

Also weighing on sentiment was news from President Donald Trump's administration that U.S. authorities will begin subjecting foreign investment in 27 industries, including semiconductors and telecommunications, to a stricter review process starting Nov. 10.

"This trade war is targeting technology," said Vicks Poon, head of investment advisory at Fubon Bank (Hong Kong). After the U.S. restrictions on foreign investments, "investors now fear the U.S. will ban Chinese technology product exports to the U.S., and whether China will ban U.S. technology companies doing business in the mainland as a counter move."

Stop-loss orders in the U.S. could drive losses for another two or three days, Poon said.

German automaker BMW Group on Thursday said it plans to increase its stake in its joint venture with Brilliance China to 75% over the coming years from 50% at present with a reported investment of 3.6 billion euros ($4.16 billion). Trading in Brilliance China Automotive Holdings was halted in Hong Kong.

Foreign ownership limits in Chinese automotive joint ventures, currently capped at 50%, are set to be scrapped by 2022.

BAIC Motor, a business partner of Germany's Daimler, slumped 12.8%.

Weak sales also helped weigh the sector down. Great Wall Motor slid 6% after reporting a 15% decline in September sales volume to 86,723 units, while Dongfeng Motor Group fell 5.7% following a 14.6% decrease in September sales volume to 271,134 units.

Electric carmaker BYD dropped 4.9% after reporting September sales of 47,913 units.

Agile Group Holdings slumped 11.8%. Bocom International on Thursday downgraded the stock to "sell" from "neutral," saying it sees an "increasing likelihood" of a full-year sales target miss after the developer reported September sales of 9.87 billion yuan earlier this week. Agile's January-September sales account for 63.8% of its full-year target.

Shares of Midea Real Estate and lithium compounds producer Ganfeng Lithium fell from their respective initial public offering prices as they made their trading debut in Hong Kong. Midea Real Estate was down 6.6% from its IPO price, while Ganfeng shares fell 28.7%.

Also making their debuts, shares of auction house Tokyo Chuo Auction ended at HK$1.56, above their IPO price of HK$1.50, while Chinese developer DaFa Properties Group ended unchanged at HK$4.20.

-- Amy Lam

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