ASIA MARKETS: Hong Kong Stocks Drop Nearly 2% As Chinese Growth Slows

By Kenan Machado Features Dow Jones Newswires

Investors likely to remain cautious during China's Communist Party congress

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Asian shares ended lower Thursday as several markets that had recently run up suffered from bouts of profit taking.

The Hang Seng Index ended down 1.9% after having fallen to a 16-day low, with Geely Auto (0175.HK) and property, banking and tech shares witnessing selling.

In mainland China, the Shanghai and Shenzhen Composites fell 0.3% and 0.8%, respectively, after early bearishness extended on China's GDP growth slowing.

Data released Thursday showed China's economic expansion slowed to 6.8% in the third quarter (http://www.marketwatch.com/story/china-gdp-growth-slows-in-third-quarter-2017-10-18), down from 6.9% in the second quarter, as Beijing's efforts to clamp down on off-balance sheet lending and corporate leverage weighed on growth.

While the third-quarter growth numbers met expectations, markets were nonetheless positioned for an upside surprise, after Chinese central bank Gov. Zhou Xiaochuan predicted the economy would touch the 7% growth rate in the second half of this year.

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"Traders may position for further weakness into the year-end, suspecting financial curbs will continue to have a negative impact on growth in China," said Stephen Innes, head of trading for Asia at Oanda.

But with the key Chinese Communist Party congress in session this week, there was pressure to maintain market stability, say analysts, and they expect some last minute buying through state-owned funds to prop up shares.

Still, the latest set of Chinese data was robust in light of China's ongoing efforts to clamp down on the economy's steep leverage. Industrial production, a main gauge of manufacturing activity, rose 6.6% in September (http://www.marketwatch.com/story/china-industrial-output-beats-september-forecast-2017-10-18) from a year earlier while retail sales rose 10.3%.

"Despite the stable GDP growth and September activity data, we continue to believe that growth momentum will slow in the coming months," said analysts at Nomura, after the data was released. They expect real gross domestic product growth to slow to 6.6% in the fourth quarter.

Elsewhere in the region, Japan's Nikkei Stock Average rose 0.4% to 21,448.52, marking another two-decade closing high and its 13th straight win. The yen's drop of 0.7% overnight against the U.S. dollar helped lift exporters.

Japanese gains were also aided by data showing Japanese exports rising for the 10th straight month in September (http://www.marketwatch.com/story/japan-exports-rise-for-10th-consecutive-month-2017-10-18), helped by a weaker yen and strong overseas demand for semiconductors.

Elsewhere in the region, Australia's S&P/ASX 200 closed up 0.1%. The lackluster performance came despite a slightly better-than-expected jobs report, with the country's unemployment rate on a seasonally-adjusted basis falling to 5.5% in September from 5.6% in August.

The Kospi closed down 0.4%, with index major Samsung Electronics (005930.SE) off by 3.3%.

In Taiwan, the Taiex ended 0.4% higher. Broker Jefferies said many stocks remain undervalued there, despite the benchmark trading at about two-decade highs. Index majors Largan Precision (3008.TW) finished up 2.7%, Hon Hai (2317.TW) , also known as Foxconn Technology, picked up 1.4% and Taiwan Semiconductor (2330.TW) added 0.6% each.

-- Liyan Qi and Grace Zhu contributed to this article.

(END) Dow Jones Newswires

October 19, 2017 06:05 ET (10:05 GMT)