September 12, 2017 2:42 pm JST

ASIA MARKETS: Hong Kong Traders Show Caution Over North Korea Sanctions

  By V. Phani Kumar
Nikkei Markets
  HONG KONG (Sep 12) -- Hong Kong shares were little changed on Tuesday morning, with the Hang Seng Index dithering near the 28,000-point level as investors reacted cautiously to the decision by the U.N. Security Council to impose more sanctions on North Korea.

The equity benchmark slipped was down less than 0.1% to 27,952.99 at midday after rising as much as 0.4% in early trade. Hang Lung Properties and Sun Hung Kai Properties fell 1.3% and 1.2%, respectively, to lead a gauge of real estate companies listed in the city lower for the first time in four days.

Carmakers with interests in electric vehicles remained under the spotlight on speculation they will benefit as China steers away from traditional fuel-powered cars. BYD jumped 7.9% in Hong Kong after rising 4.6% on Monday while Geely Automobile Holdings gained 5.5% toward a record high. India's JSW Group is in talks to form a partnership with Geely's parent company to make electric vehicles, Indian newspaper Mint reported, citing three people aware of the plans.

The morning trading showed investors are wary of geopolitical risks related to North Korea. While the S&P 500 Index jumped to a record high overnight, the Nikkei Asia300 index of more than 300 companies in the region was down 0.1% on Tuesday.

"The market is actually quite cautious about what is happening in North Korea," said Linus Yip, chief strategist at First Shanghai Securities. "It's hard to tell," he said, how North Korea will react to the sanctions.

In mainland Chinese trading, the yuan weakened 0.2% to 6.5410 against the U.S. dollar. The decline adds to the currency's 0.7% drop on Monday after the People's Bank of China eased reserve requirements on trading in currency forwards. This has been seen as an effort to avoid a stronger yuan impacting the nation's exports.

The yuan, also called the renminbi, is still up more than 6% against the dollar this year. The authorities imposed various controls last year to stem outflows from the country.

The PBOC's decision shows "improved confidence among China's authorities in the renminbi foreign exchange outlook and foreign-exchange reserves position amid solid economic growth and subsiding capital outflow pressure," said Becky Liu, head of China macro strategy at Standard Chartered Bank, in a research report. "These conditions may lead to a further unwinding of temporary measures to curb outflows and pave the way for the next round of financial reforms and renminbi internationalization."

Aluminum Corp. of China, or Chalco, jumped 7.2% in Hong Kong after trading in its Shanghai-listed shares was halted  on Tuesday. The company said it was planning a "material event" that may involve an asset restructuring.

Nine Dragons Paper Holdings rallied 6.3% to HK$15.60 after Nomura raised its price target to HK$19 from HK$12.80 earlier amid an upbeat earnings outlook. The house has a "buy" rating on the stock.

China Railway Group plans to work closely with Hong Kong train operator MTR to jointly develop rail projects in countries participating in Chinese President Xi Jinping's Belt and Road Initiative, the South China Morning Post reported, citing Meng Fengchao, chairman of the Chinese state-owned infrastructure company. China Railway shares fell 0.6% in Hong Kong while MTR slipped 0.8%.

Dairy-farm operator China Huishan Dairy Holdings said Monday it received letters from HSBC demanding the immediate repayment of loan facilities amounting to about $214 million following "one or more events of default." Trading in Huishan's shares has been suspended since March after the stock plunged 85%.

Centron Telecom International plummeted 21% to 68 Hong Kong cents, giving back almost all of its 23% gain on Monday. The drop came despite its statement late Monday that the company's revenue from the sale of private telecom network systems and products may rise by up to 45% in the coming five years.
  - By V. Phani Kumar; phani.kumar@nikkeinewsrise.com; +852 3960 5102
- Edited By Suzannah Benjamin
- Send Feedback to feedback@nikkeinewsrise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd

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