Japan stocks drop as Hong Kong security law raises concerns over Sino-U.S. tensions

SYDNEY, May 22 (Reuters) - 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-U.S.
tensions.
The benchmark Nikkei average .N225 dropped 0.8% to
20,388.16, after erasing earlier gains. But for the week, the
index gained 1.8%, 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 U.S.-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 U.S. President Donald Trump, who said the United
States would react "very strongly" against it. A big fall in Hong Kong's Hang Seng index .HSI , which last
quoted down 5.2%, especially pressured investor sentiment.
"As soon as Hang Seng started to fall, Japanese stocks and
U.S. 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 .TOPX declined 0.9% to 1,477.80, with
all but three of the 33 sector sub-indexes on the Tokyo exchange
finishing lower.
Highly cyclical mining .IMING.T , sea transport .ISHIP.T
and iron and steel .ISTEL.T were the three worst-performing
sector sub-indexes on the main bourse.
The Nikkei's heavyweight SoftBank Group Corp 9984.T
advanced 2.8% as the tech conglomerate said it plans to sell 5%
of its domestic telco SoftBank Corp as part of a programme to
raise $41 billion through asset sales. Corp 9434.T shed 4.1% on the announcement.
Skylark Holdings 3197.T slid 2.9% 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 4563.T ,
which is planning to develop a COVID-19 vaccine, added 1.3%.
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.