Hong Kong stocks dragged to weekly loss as North Korea tensions rage
HONG KONG (Nikkei Markets) -- Hong Kong shares snapped to their first weekly loss in five weeks, as investor sentiment in one of the region's best-performing equity markets this year succumbed to tensions between the U.S. and North Korea.
The Hang Seng Index slid 2% to 26,883.51, capping a weekly loss of 2.5%, its worst in 2017. HSBC Holdings, China Construction Bank (CCB), Ping An Insurance Group and AIA Group all sank 3.4% or more over the five-day period as financial companies paced declines. Bourse operator Hong Kong Exchanges & Clearing slumped 7.2% and was the week's worst performer even as trading activity was robust. Stocks worth almost HK$140 billion ($17.9 billion) changed hands on the exchange's main board Friday.
While the Hang Seng Index is still up more than 22% this year, concerns over North Korea's plan to fire ballistic missiles into waters near the U.S. territory of Guam in the Pacific Ocean have the markets shaken. U.S. President Donald Trump on Thursday escalated his threats against the Asian nation, saying he may not have been tough enough earlier this week, when he declared Pyongyang's threats will be met with "fire and fury."
"I would say the market has more correction to see, with the uncertainty surrounding geopolitical risks. Right now, we're just giving up some of the gains," said Hao Hong, chief strategist for BOCOM International in Hong Kong. "I think before this correction, the market was running very hot on good earnings and a few other good news."
Over in the mainland, the Shanghai Composite slid 1.6% Friday for its steepest drop since Dec. 12, halting seven straight weeks of advances. The yuan slumped 0.3% to 6.6655 against the dollar on Friday, paring its fifth weekly increase to under 1%.
Elsewhere in Asia, South Korea's Kospi and India's Sensex were among the week's worst performers, dropping in excess of 3%. Taiwan's Taiex ended unchanged on Friday, but shed 1.7% this week. Japan's financial markets were closed Friday for a national holiday.
"Financial markets in Korea and the rest of Emerging Asia have fallen in response to the latest increase in tensions on the Korean peninsula," economists at Capital Economics wrote in a note. "However, given the scale of the risks involved, the falls have been surprisingly small. Provided full-scale war is avoided, this is likely to remain the case."
Commodity producers continued to take a beating on Friday as the geopolitical strains weighed on the outlook for industrial metals. The Hong Kong-listed shares of China Molybdenum and Aluminum Corp. of China plunged 9%. Commodities trader Citic Resources Holdings, controlled by conglomerate Citic, slumped 5.9%.
Citic Telecom International Holdings, another member of the Citic empire, weakened 0.8% despite reporting a 10.9% increase in first-half net income.
Tencent Holdings slumped 4.9% on Friday after a Chinese regulator said it is investigating social media sites, including Tencent's WeChat, for failure to comply with cyber laws.
Some telecom, consumer and utility shares were resilient amid the broad market selloff. Snack maker Want Want China Holdings climbed 4.2% to take its weekly gain to 6.8%, the best performer on the Hang Seng Index.
Sanitary products maker Hengan International Group rose 0.6% and power utility CLP Holdings increased 0.8%, while China Mobile rose 0.8% Friday. The latter was helped for a second day by the announcement of a special dividend on Thursday.
Dongfeng Motor Group rose 4.1% after reporting a 7% increase in July sales.
Among other movers, equipment-deployment service provider China U-Ton Holdings, uranium trader CGN Mining, cigarette-packaging materials company Mengke Holdings, construction-materials maker Golik Holdings and interior decorator Royal China International Holdings all fell between 2% and 10% after issuing profit warnings.
Mongolian Mining jumped 14% after saying it expects to swing to a profit in the first half of 2017.
-- Suzannah Benjamin and V. Phani Kumar