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Nikkei Markets

Upbeat earnings push Hong Kong shares higher

Factory activity in China in April exceeds expectations

HONG KONG (Nikkei Markets) -- Hong Kong shares posted their first monthly gain in three months on upbeat earnings reports from blue-chip companies and improved risk appetite after leaders from North Korea pledged to denuclearize.

The Hang Seng Index jumped 1.7% to 30,808.45 on Monday, its biggest single-day gain in seven weeks. Trading volumes were modest ahead of a public holiday on Tuesday, with turnover on the main board marking less than HK$94 billion ($12 billion). The index ended April with a 2.4% advance, its first monthly gain since a nearly 10% rally in January.

Regional markets were also upbeat on Monday after South Korean officials said on Sunday that the North had promised to close its nuclear test site in May. The Nikkei Asia300 Index of regional companies outside Japan added 1.1%.

While trading activity in April was choppy amid concerns over trading relations between the U.S. and China, sentiment has more recently improved as investors looked ahead to this week's visit to the mainland by U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.

Mark Ng, executive director of China Demeter Financial Investments in Hong Kong, said the Hang Seng Index could possibly reach the 32,000 level if the meeting between U.S. and China officials this week results in "some positive progress." However, "so long as the haze of a trade war exists, investors should remain cautious about investing in the market."

Investors will also likely be watching the outcome of the U.S. Federal Reserve's two-day policy meeting later this week, although the central bank is widely expected to hold interest rates steady after raising them last month.

Apple suppliers AAC Technologies Holdings and Sunny Optical Technology Group were the two worst performers on the Hang Seng Index in April, dropping 19.3% and 10.2%, respectively. The declines were the result of concerns about lackluster demand for iPhones.

Energy producers CNOOC and China Petroleum & Chemical Corp. (Sinopec) were among the top gainers during the month -- rising 13.8% and 11.3%, respectively -- as crude oil prices traded near their highest level since 2014.

In Monday's trade, AAC gained 1% and Sunny Optical advanced 3.7%, while CNOOC and Sinopec fell 0.3% each.

Mainland Chinese markets performed worse in April, with the Shanghai Composite Index losing 2.7%, while the Shenzhen Composite gave up 4.2%. Monday and Tuesday are public holidays in China.

Data released on Monday showed factory activity in China expanded in April at a slower pace than in March. The official Purchasing Managers' Index for this month dipped to 51.4 from 51.5 in March, although it was higher than estimates polled in a Reuters survey. Figures above 50 signify expansion.

The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong added 2.2% on Monday. Shares in China Merchants Bank jumped 5.8% after reporting a 13.5% increase in first-quarter net profit on improved net interest margins.

Industrial & Commercial Bank of China rose 3% after reporting a 4% increase in first-quarter net profit from a year earlier. Bank of China climbed 2.4% following a 5% increase in net profit in the March quarter.

PetroChina was up 0.9% after it reported a 78.1% jump in first-quarter net profit on Friday. China Shenhua Energy shed 2.7% after the coal miner reported a 5.7% drop in quarterly net profit even as revenue rose 3.1%.

Electric carmaker BYD slid 5% following an 83.1% plunge in first-quarter net profit. It also forecast that half-year net profit could drop by 71% to 82.6%. China Railway Group advanced 4.8% following a 21.9% increase in first-quarter net profit. Revenue for the period rose 10.1% to 147.57 billion yuan ($23.4 billion).

Trading in ZTE shares remained halted. The Chinese telecommunications-equipment maker on Saturday reported a 39% jump in first-quarter net profit and a 12.2% increase in operating revenue.

ZTE said it had not yet fully estimated the impact of the U.S. ban on American companies supplying technology or components to the company and that it would update its first-quarter report once it has completed its assessment.

-- Carrie Chen

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