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Hong Kong shares dragged by U.S. warning on North Korea while Wharf surges

HONG KONG (Nikkei Markets) -- Hong Kong shares snapped a three-day rising streak Wednesday as U.S. President Donald Trump's warning to North Korea weighed on investor sentiment. The losses were tempered by Wharf Holdings, which surged to an all-time high after announcing half-yearly results.

The Hang Seng Index fell 0.4% to 27,757.09 at the close, pulling back from a 26-month high. Financial stocks led the declines, with heavyweight AIA Group dropping 2%, while mainland lenders Bank of China (BOC) and China Construction Bank (CCB) slid at least 1.3%. Hong Kong Exchanges & Clearing fell 1.2%, trimming year-to-date gains to 24%, even as the bourse operator posted a 17% increase in first-half profit during Wednesday's noon break.

Risk assets came under pressure after President Trump warned the U.S. will respond to North Korea's threats against the nation with "fire and fury." In response, Pyongyang said it's considering plans for a missile strike on Guam. The escalation in geopolitical tensions saw the Nikkei Asia300 Index drop 0.5%, while spot gold prices and the Japanese yen - both seen as safe havens - hardened.

In Hong Kong, investors were said to be locking in gains after a string of recent advances as their attention shifted to earnings-related news.

"Investors are focusing on individual stocks, particularly those that are going to announce results," said Ben Kwong, executive director at KGI Asia. "There is buying ahead of results. If there is no surprise at all, then we may see some profit-taking pressure, but if it's a positive surprise, it may go up further."

Wharf surged 14% after the property investor, a unit of diversified conglomerate Wheelock, disclosed plans for a demerger of wholly-owned subsidiary Wharf Real Estate Investment Co. for a separate listing. The REIC will hold assets valued at more than HK$230 billion ($29.4 billion) as well as Wharf's 72% stake in its listed unit Harbour Centre Development, it said. Wharf's first-half earnings, also announced at midday, climbed 26%. Separately, Wharf increased its interim dividend by 10% and said it will conditionally pay a special dividend in the form of shares in unit i-Cable Communications.

Wheelock soared 11% following the announcement, while Harbour Centre fell 0.4% and i-Cable declined 1.4%.

Heavyweight Tencent Holdings squeezed out a 0.5% advance to reach a fresh all-time high as investors await its first-half earnings due next week. The social media and gaming giant is up more than 6% so far this week.

"Tencent's shares will continue to test higher levels until the results announcement," Kwong said. "But the share price has already factored in a lot of the positive expectations. If there is no further positive surprise, the overbought shares will see some correction pressure."

In the mainland, the Shanghai Composite lost 0.2%. Official data released Wednesday showed producer prices in the country rose 5.5% in July, lower than estimates compiled by Bloomberg. The consumer price index increased 1.4% last month, also below forecasts.

"With a mild inflation environment, we expect the government to continue to maintain relatively steady but just enough liquidity condition to support growth," economists at Goldman Sachs wrote in a report.

Several stocks moved on earnings-related news or forecasts. Among them, Esprit Holdings rose 5.1% on the fashion retailer's projection for an increase in first-half profit.

Property developer CIFI Holdings rose 4.3% after a 62% jump in first-half core net profit. Camera-module maker Q Technology Group climbed 4.3% as its half-yearly profit nearly tripled. And Uni-President China Holdings, a unit of Uni-President Enterprises, surged 8.7%. Late Tuesday, the instant-noodle and beverage maker reported a 27% drop in first-half profit, but it exceeded market expectation.

Hua Hong Semiconductor slid 7.1% after an 11.9% drop in second-quarter profit. Langham Hospitality Investments lost 4.2% following a less than 1% increase in first-half profit.

Trading in Wanda Hotel Development was halted Wednesday, pending an announcement about an agreement for a possible asset restructuring. The company's shares jumped 16% Tuesday even as it denied media reports about plans to sell two projects in Australia.

-- Suzannah Benjamin and V. Phani Kumar

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