June 17, 2019 / 2:38 AM / 3 months ago

Nikkei tick up in sympathy with Hong Kong, outlook cloudy

* Nikkei gets brief boost after Hong Kong shares jump

* Outlook murky with eyes on trade, Fed

* Domestic demand-related shares shine

By Hideyuki Sano

TOKYO, June 17 (Reuters) - Japanese share prices ticked up on Monday, erasing initial losses, after Hong Kong shares gained after Hong Kong’s leader indefinitely delayed an unpopular extradition bill that would allow citizens to be sent to mainland China for trial.

Still, uncertainties over the global economy, U.S.-China trade frictions and the U.S. Federal Reserve’s policy stance kept many investors on sidelines.

Japan’s Nikkei share average rose 0.11% to 21,140 but the broader Topix was down 0.24% at 1,543.06.

The market got a brief boost after Hong Kong’s Hang Seng Index opened sharply higher after the territory’s leader Carrie Lam climbed down on the extradition bill during the weekend.

“Last week the issue looked as if it would become another thorny point between the United States and China. As the bill is now being postponed indefinitely, things will likely calm down, which is good for markets,” said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.

Overall, however, the market lacked traction as investors remain unsure how the United States and China can resolve their disputes over tariffs and technology.

It was also unclear whether U.S. President Donald Trump and Chinese leader Xi Jinping will meet on the sidelines of a Group of 20 summit in Osaka next week.

“The moment you would have a headline that the two won’t meet in Osaka, the Nikkei could fall 500 points. Investors would want to raise the ratio of cash as much as possible,” said Fujio Ando, advisor at Chibagin Securities.

Soft industrial output data from China on Friday added to the evidence that the economic disputes between the world’s two biggest economies are taking toll on growth worldwide.

Most investors now expect the U.S. Fed to drop hints of a future rate cut when its policy makers meet later this week.

Investors scurried to shares of companies that cater to domestic demand and have small exposures to the global economy.

Morinaga Milk jumped as much as 11.9%, helped by a brokerage upgrade, while internet and e-commerce firm Rakuten rose up to 3.4% to 20-month highs.

Semi-conductor shares were abandoned, with Keyence falling 1.3% and Shin-Estu Chemical 1.2%.

Japan Display fell as much as 10.5% after the embattled display maker said it has received notice from TPK Holding Co Ltd that the Taiwanese flat screen maker has decided against investing in the firm. (Editing by Simon Cameron-Moore)

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