Hong Kong's top share index closed at a new 2004 low on Monday, with China plays pummelled as earnings reports from mainland firms such as Sinopec disappointed investors.
Chinese freight forwarder Sinotrans Ltd fell 10.66 percent to HK $2.725 and auto-maker Denway Motors Ltd shed 4.76 percent to HK $8 ahead of their earnings reports.
Many investors had high expectations for China company results given the country's breakneck pace of economic growth but many have come in below expectations, triggering share price falls.
"Fear that China may raise interest rates is also souring sentiment towards H shares," said Kenny Tang, associate director at Tung Tai Securities.
The blue chip Hang Seng Index ended down 0.45 percent or 55.90 points, at 12,427.34, its lowest close since December 2003.
The H-share index of mainland Chinese firms listed here fell 1.83 percent to 4,573.09.
Sinotrans said after the market close that its 2003 net profit totalled 705 million yuan, in line with analysts' forecasts.
Huadian Power International Corp fell 9.73 percent to HK $2.55 after the company announced a 13 percent drop in 2003 earnings on Monday.
Aviation conglomerate China National Aviation Corp fell 4.44 percent to HK $1.29 after it reported a loss for 2003 when investors had been expecting a small profit.
Asia's largest oil refiner Sinopec Corp fell 1.79 percent to HK $2.75, easing off a low of HK $2.65 after the company reported a lower than expected 32.5 percent rise in annual earnings despite booming China demand for oil products.
"People seem to be selling after earnings announcements. The market is in a correction period," said Kitty Chan, portfolio manager at Rexcapital Asset Management.
Newly-listed cigarette packet printer Vision Grande Group Holdings Ltd dived 10.53 percent to HK $2.125 as demand for new China listings cools.
Vision Grande, one of a host of China firms to list in recent months, ended the morning session 9.6 percent below its offer price of HK $2.35 per share after a flat debut on Friday.
China plays are also under pressure on signs Beijing will come up with economic austerity measures to cool China's booming economy, which grew by more than nine percent last year.
Blue chips were mixed, with Television Broadcasts Ltd up 2.56 percent to HK $36 but China Unicom Ltd continuing last week's slide, falling 2.1 percent to HK $7. J.P. Morgan cut its investment rating on the stock to "neutral" from "overweight".
Traders also see further downside for the Hang Seng as local political worries take their toll on sentiment.
Beijing signalled on Friday that it will exert its power over Hong Kong more forcefully and directly in the future. Its parliament will interpret later this week key articles in the territory's constitution governing how its leader and lawmakers are chosen after 2007.
Some critics say Beijing's move has effectively put an end to the "one country, two systems" principle under which Hong Kong was promised a high degree of autonomy after it returned to Chinese rule in 1997.