Hong Kong stocks sank 3.11 percent on Monday in their biggest fall in two years amid sliding Asian markets and tumbling prices for gold and other metals, which triggered a sell-off in resource shares.
Buying power also sputtered as upcoming initial public offerings soaked up funds that would otherwise go into the market.
The benchmark Hang Seng index ended at 15,805.52, a level unseen since March 31. The closing level is about 9 percent off its highest close this year, set earlier this month.
The sell-off in commodities drove the China Enterprises index of H-shares to 6,644.02 for a 5.66 percent loss, its worst fall in two years.
Investors began dumping the already-weak resource shares in the afternoon after gold fell more than 2 percent to its lowest level in nearly four weeks on Monday. The sell-off spilled into the blue chips, which fell with the Tokyo market. Japan's Nikkei ended down 1.84 percent on Monday.
"It's a domino effect," said Louis Wong, research director at Phillip Securities.
As for the declining commodities, "hedge funds and institutions are sitting on huge profits in commodity shares and when oil and metals fell, they wanted to lock in profits", Wong said.
Gold miners Zijin Mining Group Co Ltd tanked 13.8 percent to HK$3.75 and Lingbao Gold Co Ltd plunged 16.4 percent to HK$7.65. Jiangxi Copper Co Ltd slumped 11.4 percent to HK$6.60 and China's top zinc producer Hunan Non-ferrous Metals Corp Ltd plummeted nearly 15 percent to HK$2.725. China's top oil producer PetroChina Co Ltd suffered a 5.7 percent loss to HK$8.30 as crude prices fell.
"Any bad news right now will have a reinforcing down cycle effect," said Linus Yip, strategist at First Shanghai Securities. "We have to be cautious. If the US dollar drifts lower, the market can absorb it, but if it moves fast in either direction, equity markets at such high levels will be hurt."
Among blue chips, the biggest losers were mainland companies including China Mobile (Hong Kong) Ltd, which sank 5.63 percent to HK$40.25 and China Unicom Ltd which fell nearly 5 percent to HK$6.70 despite their strong new subscriber additions reported for April.
Li & Fung was the only blue chip that managed to eke out a gain. German retailer KarstadtQuelle said it sold its purchasing arm to the Hong Kong trading firm, which will also be in charge of imports for the company. Turnover was HK$39.9 billion (US $5.1 billion) up 36 percent from Friday's HK$29.4 billion.
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