Japan stocks drop as Hong Kong security law raises concerns over Sino-US tensions

• The benchmark Nikkei average dropped 0.8pc to 20,388.16, after erasing earlier gains. But for the week, the index gained 1.8pc, logging its first weekly rise in two.
• The broader Topix declined 0.9pc to 1,477.80, with all but three of the 33 sector sub-indexes on the Tokyo exchange finishing lower.

SYDNEY: Japanese shares fell on Friday, as risk sentiment was hit after China's plans to impose a new security legislation on Hong Kong fuelled worries over Sino-US tensions.

The benchmark Nikkei average dropped 0.8pc to 20,388.16, after erasing earlier gains. But for the week, the index gained 1.8pc, logging its first weekly rise in two.

"There is no doubt that corporate earnings in Japan are going to be challenging. So investors have been caught between economic reality and US-China tensions this week," said Soichiro Matsumoto, chief investment officer Japan at Credit Suisse.

Global equities pulled back as Beijing was set to impose a new national security legislation on Hong Kong. The move drew a warning from US President Donald Trump, who said the United States would react "very strongly" against it.

A big fall in Hong Kong's Hang Seng index, which last quoted down 5.2pc, especially pressured investor sentiment.

"As soon as Hang Seng started to fall, Japanese stocks and US futures followed suit," said Takeo Kamai, head of executions services at CLSA in Tokyo.

"Trump will use his anti-China card in every way for his campaign, while China is firming it's grip on Hong Kong during National People's Congress."

The broader Topix declined 0.9pc to 1,477.80, with all but three of the 33 sector sub-indexes on the Tokyo exchange finishing lower.

Highly cyclical mining, sea transport and iron and steel were the three worst-performing sector sub-indexes on the main bourse.

The Nikkei's heavyweight SoftBank Group Corp advanced 2.8pc as the tech conglomerate said it plans to sell 5pc of its domestic telco SoftBank Corp as part of a programme to raise $41 billion through asset sales. SoftBank Corp shed 4.1pc on the announcement.

Skylark Holdings slid 2.9pc after the restaurant chain operator cut its mid-year dividend estimate to zero, citing the need to preserve cash amid the coronavirus crisis.

Elsewhere, Japanese bio-pharma startup AnGes Inc, which is planning to develop a COVID-19 vaccine, added 1.3pc.

Investors largely shrugged off the Bank of Japan's decision to launch a new lending facility that aims to channel more funds to small and midsize businesses suffering from the pandemic, which came as no surprise, according to analysts.