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Stocks

Hong Kong shares slip amid caution over rising credit costs

Chinese energy producers advance as higher oil prices take hold

HONG KONG (Nikkei Markets) -- Hong Kong shares declined after a choppy morning session on Thursday on concern about elevated credit costs in the city and mainland China and caution ahead of the appointment a new chair of the U.S. Federal Reserve.

By noon, the Hang Seng Index had shed 0.2% to reach 28,552.47 after changing direction at least three times during the session. HSBC Holdings fell 0.9% after former British Labour cabinet minister Peter Hain demanded that regulators investigate the bank for "possible criminal complicity" in regard to its alleged involvement in a South African corruption scandal.

PetroChina and CNOOC rose 4.1% and 3.4%, respectively, as U.S. oil prices held their ground above $54 a barrel after climbing 5.2% last month. CK Asset Holdings, the property developer controlled by billionaire Li Ka-shing, advanced 3% after it entered an agreement to sell The Center office tower in Hong Kong's central business district for HK$40.2 billion ($5.15 billion).

China's 10-year government bond yield was at 3.88% on Thursday, close to a three-year high reached on Monday. The Hong Kong interbank offered rate with a three-month tenor rose to 0.98% on Thursday. It was at 0.78% at the end of September.

"Investors should be a bit cautious about the Hibor rally," said Will Leung, head of investment strategy for greater China at Standard Chartered Bank. "Hopefully, it is only pushed up by short-term initial public offering margin lending demand," and not because of tighter liquidity in the banking system.

Garment-supplier Crystal International is expected to start trading on Hong Kong's main board on Friday while Tencent Holdings-backed e-book company China Literature's shares are expected to list on Nov. 8. Chinese communication cable manufacturer Putian Communication Group and mainland toy retailer Kidsland International Holdings will also make their Hong Kong market debuts next week.

The Nikkei Asia300 Index edged 0.1% higher after the U.S. central bank stood pat on interest rates at the conclusion of its two-day policy review on Wednesday, as was widely expected. Markets await the appointment of a new Federal Reserve chair, with incumbent Janet Yellen's term due to expire in February. The White House plans to nominate current Fed Governor Jerome Powell for the role later on Thursday, the Financial Times reported.

"Market participants have already digested a December [rate] hike and balance-sheet tapering from the Fed, and Hong Kong equities are likely to continue to perform well in the fourth quarter with minor corrections from time to time," Leung said. He expects the Hang Seng Index to breach a 10-year high "soon." Rallies around initial public offerings such as that of China Literature should also improve sentiment.

Over in the mainland, the Shanghai Composite fell 0.6%, while the onshore traded yuan edged 0.1% higher against the dollar at 6.5991.

Dairy-farm operator China Huishan Dairy Holdings said it had been informed by Yang Kai, its chairman and controlling shareholder, that he and a majority of the company's Chinese creditors have agreed in principle to support an overall restructuring of the company's debt. The Hong Kong-listed company's shares have been on a trading halt since an 85% crash during the morning session on March 24.

In its statement Wednesday, China Huishan said the company has continued to operate normally and is on track to achieve positive cash flow from operations by March 2018.

China Evergrande Group climbed 2.1% after reporting a 55.8% increase in contracted property sales for October.

China Railway Construction edged 0.8% lower. Late Wednesday, the company said a consortium it had joined had won a bid for a Guangzhou construction project involving investment of about 10.8 billion yuan ($1.63 billion).

A four-bedroom house from the Mount Nicholson project owned by Wheelock and its subsidiaries in Hong Kong's Peak district was sold for HK$1.16 billion, Reuters reported, citing a Wheelock Properties' spokesperson. Wheelock rose 0.9% while its unit Wharf Holdings added 0.1%.

Oilfield engineering company TSC Group Holdings slumped 3.8% after saying it expects to record a loss of about $2.2 million from the disposal of a plant in Houston for $6.5 million.

Aluminum product maker China Hongqiao Group surged 21.6% to HK$12.28 after saying majority shareholder Hongqiao Holdings had bought 5.8 million shares at an average price of HK$9.69. Following the purchase Hongqiao Holdings holds 81.65% of the company's total issued share capital.

China Environmental Technology Holdings soared 26.7%. The company on Wednesday announced plans to issue convertible bonds worth $9 million.

--Amy Lam

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