Hong Kong stocks bounce back over US-China trade optimism

Hong Kong shares clawed back from losses to close slightly higher on Thursday, as hopes of a positive outcome from U.S.-China trade talks helped to lift sentiment, but falling U.S. Treasury yields continued to feed investors' recession fears. At the close of trade, the Hang Seng index was up 46.96 points, or 0.16 per cent, at 28,775.21. The Hang Seng China Enterprises index fell 0.09 per cent to 11,294.81.

The sub-index of the Hang Seng tracking energy shares dipped 0.2 per cent, while the IT sector declined 0.18 per cent, the financial sector ended 0.1 per cent lower and the property sector rose 1.25 per cent. The Hang Seng had spent much of the day in negative territory, with falling U.S. 10-year yields feeding fears that an inverted U.S. Treasury yield curve could signal a recession.

Yields on 10-year U.S. Treasuries fell to a fresh 15-month low on Thursday of 2.34 per cent and were last at 2.3629 per cent. But helping to lift sentiment, Reuters reported that the United States and China have made progress in all areas under discussion in trade talks, with unprecedented movement on the touchy issue of forced technology transfers. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrived in Beijing for the latest round of talks Thursday.

The top gainer on the Hang Seng was China Mengniu Dairy Co Ltd, which gained 5.47 percent, while the biggest loser was Sino Biopharmaceutical Ltd, which fell 1.00 percent. China's main Shanghai Composite index closed down 0.92 per cent at 2,994.94 points, while the blue-chip CSI300 index ended down 0.4 per cent. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.11 per cent, while Japan's Nikkei index closed down 1.61 per cent. The yuan was quoted at 6.7284 per U.S. dollar at 08:25 GMT, 0.03 per cent weaker than the previous close of 6.7265.

The top gainers among H-shares were Air China Ltd up 3.6 per cent, followed by SINOPHARM GROUP CO LTD, gaining 2.54 per cent, and China National Building Material Co Ltd, up by 2.51 per cent. The three biggest H-shares percentage decliners were Byd Co Ltd, which was down 4.27 per cent, China Pacific Insurance Group Co Ltd, which fell 2.6 per cent, and China Tower Corp Ltd, down by 2.2 per cent.