Hong Kong shares tumble on trade war and protest worries

HONG KONG (Nikkei Markets) — Hong Kong shares headed for their lowest level in more than six months on Monday, as the yuan’s slump against the dollar added to Sino-American trade tensions and amid escalating political unrest in the city.

The Hang Seng Index slumped 2.9% to 26,140.72 by noon, poised for its worst close since January. Social-media and gaming major Tencent Holdings slid 3.8% and pan-Asia insurer AIA Group declined 3.6%, with all 50 of the index’s members in the red.

“There is no good news while uncertain factors keep coming. So the pressure to sell is still being released,” said Linus Yip, chief strategist at First Shanghai Securities.

Heavyweight bank HSBC Holdings slipped 1.5% after unexpectedly saying Chief Executive Officer John Flint would be stepping down. The London-headquartered bank also reported an 18.6% increase in first-half net profit and announced plans to buy back up to $1 billion in shares. Hang Seng Bank, a unit of HSBC, fell 4.1% despite reporting an 8% increase in first-half net profit of 13.66 billion Hong Kong dollars ($1.74 billion).

Asian equities remained under pressure following a sell-off on Friday after U.S. President Donald Trump last week upped the ante in an ongoing Sino-American trade war by announcing fresh tariffs on Chinese goods. The yuan traded onshore tumbled 1.3% to 7.0253 against the U.S. dollar, sliding below 7 for the first time since 2008. The People’s Bank of China said losses in the yuan were largely due to trade protectionism and tariffs on Chinese goods, although the central bank added it was confident and capable of keeping the currency basically stable. The Shanghai Composite Index was down 0.8% by midday.

Economists at Capital Economics wrote in a note that the fact that the Chinese central bank had stopped defending the yuan’s 7-level against the dollar “suggests that they have all but abandoned hopes for a trade deal with the U.S.”

Meanwhile, the Hang Seng Index was leading losses in the region while anti-government demonstrations continued to throttle Hong Kong, with protesters calling for a general strike on Monday and causing disruptions to public transport. Hundreds of flights to and from the city were reportedly canceled, with air traffic controllers calling in sick en masse, according to the South China Morning Post.

Hong Kong citizens have staged a series of protests over the past two months, demanding the withdrawal of a controversial and now-suspended extradition bill, and Chief Executive Carrie Lam’s resignation.

“This is a free fall today. Everyone knows we are facing problems inside and outside,” said Francis Lun, chief executive officer at Geo Securities in Hong Kong.

Hong Kong rail operator MTR fell 3.6% after logging its worst weekly performance since February last week with a 6.9% tumble. MTR on its website announced the disruption of services on several lines Monday.

Mainland property developers China Vanke and Country Garden Holdings declined amid broad market losses in Hong Kong despite reporting higher contracted sales in July. China Vanke slipped 3.3% even as contracted sales for last month increased 11% from a year ago, while Country Garden was down 3.5% despite a 16% year-on-year increase in July sales.

Future Land Development Holdings, which reported a 33.7% jump in July contracted sales, shed 4.1%.

Lee’s Pharmaceutical Holdings slid 8.9% after saying interim results for a phase III clinical trial for an oncolytic immunotherapy for advanced liver cancer suggested the study was unlikely to meet its primary objective. The company said the Independent Data Monitoring Committee recommended the discontinuation of the trial.

Wisdom Sports slumped 13.3% after saying it expects to have swung to a loss for the January to June period, compared with a profit in the year-ago period.

— Benny Kung

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