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Nikkei Markets

Hong Kong stocks waver with US-China trade ties in focus

Trading in Samsonite halted as shares tumble after short-seller report

HONG KONG (Nikkei Markets) -- Hong Kong shares were little changed after a choppy morning session on Thursday, with caution prevailing on concerns over trade relations between China and the U.S.

The Hang Seng Index was up less than 0.1% to 30,686.97 by the noon lunch break after changing directions several times. China Petroleum & Chemical (Sinopec) and PetroChina added 2.7% and 1.5%, respectively, after Brent crude futures erased early losses on Wednesday. Pork producer WH Group, which had rallied 4.9% on Monday amid signs of a thaw for Sino-U.S. trade tensions, was down for a second consecutive day, declining 2.4% by midday.

Luggage-maker Samsonite International slumped 9.8% before trading was halted. Short-seller Blue Orca Capital issued a report on the company on Thursday, saying it suspected that Samsonite used improper accounting to inflate its financial performance. An emailed request seeking comment from Samsonite was not immediately answered.

U.S. President Donald Trump on Wednesday said on Twitter that while the nation's trade deal with China was "moving along nicely," the U.S. will probably have to use "a different structure in that this will be too hard to get done." The post further unnerved investors who were already uncertain over the dynamic between the world's two largest economies. The remarks came after a meeting between U.S. and Chinese delegates in Washington last week ended with Treasury Secretary Steven Mnuchin saying the "trade war" was on hold.

Separately, the U.S. Federal Reserve's minutes from its latest meeting indicated a rate increase in June but did not signal a faster pace of hikes going forward.

Francis Lun, chief executive at GEO Securities in Hong Kong, said the city's stock market is lacking momentum. "People thought the U.S. and China had reached a trade deal, but yesterday's big decline erased gains a few days ago, and shows the market has lost hope now," Lun said. "Only consumption stocks, such as education stocks, could rally in this market situation."

In the mainland, the Shanghai Composite Index was little changed by midday.

Aluminum giant United Company Rusal rose 3.7% in Hong Kong. On Thursday, the company said Chief Executive Alexandra Bouriko had resigned with immediate effect and Evgeny Nikitin was named acting chief.

The management changes come after the U.S. in April imposed sanctions on Russian oligarchs, including Oleg Deripaska, Rusal's controlling shareholder. In the Thursday statement, Rusal said that on May 22, the U.S.'s Office of Foreign Assets Control had additionally clarified that parties may be removed from the Specially Designated Nationals list by demonstrating a change in the circumstances which led to their SDN designation.

Liquid crystal display product maker Truly International Holdings slid 6.5% after saying it expects about an 80% drop in net profit for the January-March quarter.

Lee's Pharmaceutical Holdings climbed 2.7% after saying it received approval from the China Food & Drug Administration to conduct clinical trials of Gimatecan, an investigational oncology product.

Plastic-components maker TK Group Holdings fell 5.5% to HK$5.86 after its controlling shareholder Eastern Mix agreed to sell 40 million shares at HK$5.80 apiece, lowering its stake to 39.79% from 44.59%.

Dynam Japan Holdings, an operator of mechanical games, rose 3.1% after reporting a 16.1% increase in net profit for the year ended March 31 to 803 million Hong Kong dollars ($102.3 million). Revenue fell 3% to HK$11.23 billion.

Property developer HKR International advanced 4.6% after saying it expects a near tripling of its net profit for the year ended March 31.

-- Amy Lam

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