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Hong Kong shares lose gains as China stocks retreat with Wanda in focus

HONG KONG (Nikkei Markets) -- Hong Kong shares gave up early gains to end little changed Thursday, tracking an afternoon selloff on mainland Chinese bourses. Chinese conglomerates in Hong Kong and small-cap companies in Shenzhen were among the notable decliners.

The Hang Seng Index fell less than 0.1% to 25,674.53 at the close. The gauge lost nearly 200 points from the day's peak as Chinese equities suffered a selloff in the final hour of the day's trading. While the CSI 300 Index of large companies in Shanghai and Shenzhen managed to close 0.1% up at an 18-month high, the Shenzhen Composite slid 1.3% and the ChiNext index of small-company shares in the city sank 1.4%. The CSI 300 had risen more than 1% earlier in the day, as buying activity in the wake of MSCI's decision the previous day to add A-shares to its benchmark indexes spilled over.

The drop in Shenzhen stocks came as shares of Wanda Film Holding tumbled almost 10% before trading was halted. Its parent Wanda Group said in a statement on its website "someone on the internet viciously speculated that some banks" had issued a notice to dump Wanda's bonds. The statement added an investigation showed the speculation was "just rumors" and that all its operations were "fine." The Wanda group - controlled by Wang Jianlin, mainland China's richest man with a net worth of more than $30 billion according to Forbes - has business interests spanning the real estate, hospitality, entertainment, retail, financial services and technology industries.

Linus Yip, chief strategist at First Shanghai Securities, said nervousness related to Wanda possibly led to afternoon losses. "Though the rumors related to Wanda were there since the morning, we saw more of an effect in late trading," he said.

Shares of other Chinese conglomerates also retreated, with Fosun International dropping 5.8% in Hong Kong, while its unit Shanghai Fosun Pharmaceutical tumbled 8.1% in Shanghai and 5.9% in Hong Kong. HNA Holding Group sank 6.1% in Hong Kong. The reasons behind those losses weren't immediately clear.

PetroChina and CNOOC dropped 0.4% each in Hong Kong amid weakened sentiment after U.S. crude oil prices entered a bear market this week.

Lending support to the broader market, heavyweight Tencent Holdings rose 0.9% following overnight gains for Nasdaq Composite on Wall Street.

Power producers also rallied on optimism over their earnings outlook following reports that Chinese authorities planned to cancel a special levy on coal-driven independent power producers. China Resources Power Holdings jumped 4.8%, while Huaneng Power International climbed 1.2%.

China Gas Holdings soared 9.2%, its steepest rally since October 2015, after reporting an 82% surge in full-year profit.

Suchuang Gas jumped 8.2% after saying it entered a strategic partnership with China Railway Real Estate Group.

Shanghai Electric Group climbed 4.9%. Trading in its Shanghai listed A-shares was suspended. The electrical-equipment manufacturer said it received notice from China Securities Regulatory Commission that a vetting committee will consider the company's proposed asset acquisition by issuance of shares.

Nan Nan Resources Enterprise slumped 5.8% as the coal miner resumed trading. The company said late Wednesday it has been unable to reach Executive Director Lo Fong Hung since June 8. Separately, Nan Nan also said it swung to a profit in the year ended March 31.

China Overseas Land & Investment edged 0.2% higher. The developer said it has established a joint venture project company for development of land in the Chinese city of Zhengzhou.

-- Nimesh Vora and V. Phani Kumar

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