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Hong Kong shares extend slump as Trump gets tougher on North Korea

Investors shun risk assets, trading volume surges

HONG KONG (Nikkei Markets) -- Hong Kong shares were the worst hit in Asia on Friday after U.S. President Donald Trump dialed up his warning to North Korea, leading investors to shun risk assets.

The Hang Seng Index fell 1.9% to 26,926.38 by midday, headed for a third day of losses. Industrial and Commercial Bank of China (ICBC) and China Life Insurance sank at least 2.6% on Friday, pacing losses for mainland financial companies, while Hong Kong rail operator MTR slid 3.3% after reporting an 8% decline in first-half net profit from recurring operations.

Heavyweight Tencent Holdings slid 4% in heavy volume and was the most active stock on the bourse Friday, while Apple-supplier AAC Technologies Holdings lost 2.7%. Chinese e-commerce giant Alibaba Group Holding and search engine operator Baidu slid at least 3.4% in U.S. trading overnight as the Nasdaq Composite suffered its worst single-day drop in almost three months.

President Trump on Thursday stepped up his threats against North Korea after the Asian nation said it planned firing ballistic missiles into waters near the U.S. territory of Guam. He said he may not have been "tough enough" earlier this week, when he said Pyongyang's threats will be met with "fire and fury." The Hang Seng Index has dropped 3.3% since Tuesday's close, poised for its worst three-day fall since October 2016.

"When the market corrects, it's never a straight line, but in the coming weeks, we will see the gauge going much lower than 27,000," said Hao Hong, chief strategist for BOCOM International in Hong Kong. "But I wouldn't say that people are panicking."

Friday's losses in Hong Kong were accompanied by trading volumes that were much higher than the daily averages in the recent past. More than HK$76 billion ($9.7 billion) of stocks had changed hands by noon on the bourse's main board. Inflows via the trading links with Shanghai and Shenzhen stock exchanges, usually a source of support for local equities, turned into outflows, with mainland investors selling a net HK$612 million of Hong Kong shares by noon.

Elsewhere in the region, South Korea's Kospi gave up 1.6%, Singapore's Straits Times Index retreated 1.1% and Indonesia's main equity gauge slid 1.1%. The Nikkei Asia300 Index of the region's most influential companies dropped 1.6%.

In the mainland, the Shanghai Composite shed 1.6%, while its Shenzhen counterpart lost 1.1%. The onshore traded yuan slumped 0.3% against the greenback to 6.6684. The Japanese yen was up 0.2% against the dollar, headed for a fourth day higher, as investors continued to flock to safety.

United Company Rusal slumped 6.6% after saying Zonoville Investments has agreed to buy 1.06 billion shares in the company from Dimosenco Holdings in a deal worth $503.9 million. Zonoville is an associated company of SUAL Partners, which owns about 15.8% in Rusal.

Chinese sportswear maker Li Ning fell 2.1% amid broad market losses. The company reported a 67% increase in first-half profit earlier Friday.

Mongolian Mining jumped 16% after saying it expects to swing to a profit of $250 million to $375 million for the first half of 2017.

Country Garden Holdings lost 6.3%. Late Thursday, the developer said contracted sales for July more than doubled from a year ago.

China U-Ton Holdings fell 4.2% after the optical fiber and low-voltage equipment integration services provider said it expects to swing to a loss in the first half.

Sinotrans Shipping fell 4.6%. The company posted a profit of $8 million during the first half, following a loss in the year ago period and a 29% increase in revenue. Sinotrans said its board resolved not to declare an interim dividend for the six months ended June 30.

Dongfeng Motor Group rose 2% following a 7% increase in July sales volume.

Trading in Genting Hong Kong, a part of Malaysia's Genting, was halted pending an announcement related to a share disposal of Norwegian Cruise Line Holdings.

-- Suzannah Benjamin and V. Phani Kumar

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