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Stocks

Hong Kong shares defy Moody's downgrades to snap up third weekly gain

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Tencent's WeChat app has given the brand a massive boost.   © Reuters

HONG KONG (Nikkei Markets) -- Hong Kong shares cruised higher for a third week as a rally by heavyweight Tencent Holdings and insurers combined with positive U.S. cues to overshadow Moody's Investors Service's downgrades of Chinese and Hong Kong credit ratings.

The Hang Seng Index took home a 1.8% advance for the week, even as it ended flat at a 22-month high of 25,639.27 on Friday. Tencent clinched a 3.6% gain during the week, capping its longest streak of weekly advances in four years, as euphoria over last week's earnings beat spilled over. Ping An Insurance Group rallied 8%, its best week since July 2015, to lead life insurers after a Chinese regulator announced plans to simplify investments into projects under the One Belt, One Road initiative. On Friday, Ping An, China Life and Tencent lost at least 0.3% each.

Regional investors took comfort from a rebound on Wall Street this week as the S&P 500 Index set fresh record highs and minutes of the Fed's May meeting suggested the central bank will likely remain cautious over tightening, even as it signaled a rate increase "soon." The Shanghai Composite finished the week 0.6% higher as investors appeared to pay little heed to Moody's downgrades. The Nikkei Asia300 Index of more than 300 of the region's most influential companies added about 2% this week.

What is important to Hong Kong and other Asian markets is that the Fed rate hikes don't happen "too fast" or "disturb capital flows," said Victor Au, chief operating officer at Delta Asia Securities. Investors should have "enough time to adjust to rate increases," he added.

Mainland markets will be shut on Monday and Tuesday for public holidays, while Hong Kong will be closed Tuesday.

The onshore yuan rose 0.1% to 6.8613 against the dollar Friday. The China Foreign Exchange Trade System said on Friday it will change the way China calculates the yuan's guidance rate as part of efforts to stabilize the currency and reduce volatility. The CFETS said a "counter-cyclical factor" would be introduced to ensure the yuan's daily reference rate better reflects supply and demand.

"This new factor could filter out the impact of excessive volatility in the spot market by reducing the closing price's role in the next day's fixing," HSBC analysts led by Paul Mackel wrote in a note. "The likely adjustment in the fixing mechanism may also reflect the policy intention to have the yuan trade with greater two-way volatility, which is easier to introduce during a soft U.S. dollar environment."

CNOOC and PetroChina fell 0.9% each on Friday, a day after Brent crude slumped 4.6% following the Organization of Petroleum Exporting Countries' decision to extend output cuts.

Sunac China Holdings slid 2.7%. The property developer said it had acquired an additional 98.9 million shares in Shenzhen-listed Jinke Property for 596 million yuan ($87 million) between April 14 and April 28, increasing its stake to 25%. Jinke shares have been halted since May 5.

Xtep International Holdings slid 2.4% Friday after the sportswear-maker said first-quarter same-store sales recorded a "low-single-digit" growth.

Regina Miracle International Holdings fell 1.6% on Friday after the brassier-maker said it expects a "significant" decrease in net profit for the year ended March 31.

China Foods fell 1% Friday, parings its weekly gain to 7.3%. The company expects a gain of 1 billion yuan from the sale of its entire stake in Cofco Fortune Food Sales & Distribution to China Agri-Industries Holdings. China Agri shares rose 0.8%.

Sino Harbour Holdings fell 2% on Friday after reporting a 44% drop in net profit for the year ended March 31.

Loudong General Nice Resources China Holdings declined 1.4% after it Chairman and CEO Geng Tao resigned.

-- Nimesh Vora and V. Phani Kumar

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.

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