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Nikkei Markets

Protests and trade war drag Hong Kong shares lower

MTR slips after weekend disruptions while casino operators drop on Macao data

HONG KONG (Nikkei Markets) -- Hong Kong shares ended lower on Monday, after a round of additional punitive U.S.-China trade tariffs took effect over the weekend and protests in the city intensified.

The Hang Seng Index shed 0.4% to 25,626.55. Pan-Asia insurer AIA Group fell 1.4%, the largest contributor to the gauge's losses by points.

Casino operators Sands China and Galaxy Entertainment Group dropped 2.1% and 1%, respectively, after data released Sunday showed Macao's gross gaming revenue declined by a wider-than-expected 8.6% in August.

Hong Kong light rail operator MTR lost 3.1%. Train services in the city were disrupted on Saturday because of clashes between anti-government protesters and the police. Activists vandalized several local train stations in the city. On Sunday, train services to and from the airport were suspended by authorities after protesters began demonstrations outside the main building.

The events marked the 13th consecutive weekend of unrest in the Asian financial center, triggered by an uprising against a controversial extradition bill that could have allowed people to be extradited to China for trials. The movement has since evolved into a call for greater local democracy, among other things.

Local real estate companies Link Real Estate Investment Trust and Sun Hung Kai Properties shed 2.1% and 2.8%, respectively.

"I don't want to see things become extreme, or the imposition of the emergency law. I hope things can cool down and we can find a way out," said Banny Lam, head of research at CEB International.

Carrie Lam has said all options are on the table to quell unrest in the city. The Emergency Regulations Ordinance, if imposed, could include arrests, property seizures, control of transportation and ports, and censorship.

Meanwhile, markets in the rest of the region also fell amid an escalation in Sino-American trade tensions. The U.S. on Sunday imposed a 15% tariff on Chinese goods worth more than $100 billion, part of a proposed set of levies on $300 billion in goods imported from the Asian nation. China, in retaliation, has said it is raising existing tariffs on $75 billion of U.S. goods in two steps. A new 5% tariff on crude oil imports from the U.S. took effect on Sunday.

Investors are awaiting more details on when officials from Washington and Beijing will meet for further talks on trade. U.S. President Donald Trump on Friday signaled that officials from both countries will meet in September and that trade talks are ongoing. However, China has not confirmed when or where the next round of talks will take place.

"The greatest risk really is that both sides stop talking," CEB International's Lam said, adding that chances of trade talks between the U.S. and China resuming are "50-50" at the moment. "Many of the risks are priced in, but if they stop talking, that could still influence investment atmosphere."

In the mainland, the Shanghai Composite Index rose 1.3%, while the yuan slipped 0.3% against the dollar to 7.1720.

A private survey released on Monday showed factory activity in China expanded last month, with the Caixin/Markit manufacturing Purchasing Managers' Index coming in at 50.4 for August from 49.9 in July. A reading above 50 signals expansion.

The official PMI reading released by China's National Bureau of Statistics on Saturday, in contrast, dropped to 49.5 last month from 49.7 in July.

Chinese carmaker Guangzhou Automobile Group fell 5.6% in Hong Kong following a 29% slide in first-half profit and a 24% decline in revenue.

Car dealerships operator China ZhengTong Auto Services Holdings tumbled 14.5% after reporting a 34% decline in profit and a 7% decrease in revenue for the first half of the year.

China Railway Construction rose 2.3% following a 16% increase in first-half profit.

Yanzhou Coal Mining jumped 18.7% after reporting a 26% jump in net profit for the January-to-June period.

--Benny Kung

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