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Tencent leads rebound of Hong Kong shares

Phone component makers also return to gains while developers slip

HONG KONG (Nikkei Markets) -- Hong Kong shares edged higher on Thursday for the first time in three days, with Tencent Holdings leading a rebound among technology companies after a string of weak showings.

The Hang Seng Index ended 0.3% higher at 28,303.19, after contracting 3.1% over the previous two days, the steepest two-day fall in almost four months. Heavyweight stock Tencent climbed 3.3% and was the biggest driver of the gauge's gains by points. Acoustic-components maker AAC Technologies Holdings advanced 3% and lens-modules maker Sunny Optical Technology Group added 2.5%. Ping An Insurance Group, also among the major decliners of late, climbed 2.4%.

Property developers broadly fell ahead of the U.S. Federal Reserve's policy review next week, where the central bank is expected to boost interest rates. Sun Hung Kai Properties slipped 1% and Sino Land fell 1.2%.

Country Garden Holdings, which has nearly tripled so far this year, slid 1.9%. The property developer reported contracted sales of 534.3 billion yuan ($80.8 billion) for the first 11 months of 2017 during Thursday's midday break, compared with 288.1 billion yuan in the same period a year ago. Yuexiu Property gave up 0.7% despite a near doubling of its contracted sales for November.

Energy companies slid after crude oil prices weakened overnight, with CNOOC retreating 0.8%. The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong, also known as the H-share index, fell 0.1%.

Nearly HK$121 billion ($15.5 billion) of stocks changed hands on the stock exchange's main board on Thursday.

"Growth stocks, such as technology stocks, have been performing very well this year, but in December each year we see sector rotation back into value stocks such as financials and industrials," said Andy Wong, an investment strategist at wealth management company Harris Fraser (International) in Hong Kong. "I believe value stocks will outperform in 2018 but tech stocks will still be our core holdings."

Wong said he cut some of his positions over the previous two days and expects to add to them in mid-December.

"The recent stock market retreat has scared some people, and some are taking cash off the table," said Joshua Crabb, head of Asian equities at Old Mutual Global Investors, at a media briefing in Hong Kong on Thursday. "But I think they are irrational. People will see things just as optimistically as this year when they come back to the table in 2018."

Crabb said he prefers the Hang Seng China Enterprises Index to the Hang Seng Index because of the former's lower valuations and as it has "more exposure to the cyclical recovery in China."

The H-share index currently trades at 8.8 times its earnings, compared with a price-to-earnings valuation multiple of 12.9 times for the Hang Seng Index and 14.8 times for the Shanghai Composite Index.

The Shanghai gauge gave up 0.7% on Thursday, while the Shenzhen Composite Index lost 0.6%. The Nikkei Asia300 Index of regional stocks outside Japan added less than 0.1%.

Mobile games developer NetDragon Websoft Holdings slumped 15% in heavy trading on Thursday, erasing gains recorded earlier this week. The company on Wednesday reported a profit of 5.1 million yuan for the quarter ended Sept. 30, compared with a loss a year ago.

China Longyuan Power climbed 2% after saying its power generation increased 17.3% in November from a year earlier.

-- Amy Lam

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