Leading Hong Kong shares finished lower on Thursday as a rally in property shares ran out of steam and a lack of fresh fund flows dampened sentiment.
"Overall, the Hang Seng just couldn't make the 12,300 mark and had to consolidate until more funding flows into the market," said Alfred Chan, chief dealer at Cheer Pearl Investment Ltd.
The blue chip Hang Seng Index finished down 1.63 percent, or 200.51 points, at 12,119.75. Volume, which was thin in the morning session, picked up in the afternoon, with an over all HK $14.69 billion (US $1.88 billion) changing hands.
China enterprise stocks, better known as H-shares, also fell sharply in the afternoon session.
The H-share index tumbled 2.38 percent to 4,300.79, with only gold mining firm Zijin Mining gaining ground on news of strong global gold prices. Zijin Mining closed up 2.94 percent at HK $2.65.
Traders cited market talk of possible further monetary austerity measures aimed at cooling China's surging economy. Some fund managers remain worried about rising inflation and uninspiring corporate earning reports, even though a state-sponsored think-tank on Thursday said it expects consumer prices to ease in the second half of the year.
Chinese automotive shares were among the biggest losers after a report that June car sales slipped by 7.1 percent in June on a monthly basis, adding to two previous months of declines.
Brilliance China Automotive Holdings Ltd, the Chinese partner of German car maker BMW, fell 7.0 percent to HK $2.325.
China's largest listed coal producer, Yanzhou Coal Mining Co Ltd, fell 5.41 percent to HK $8.75 after resuming trade following an announcement of a share placement to finance the acquisition of two new coal mines and a methanol plant.
Local media reports cited Jiangxi Copper as a top candidate for a share placement. The firm's shares fell 5.23 percent to HK $3.625.
Hong Kong blue chips also fell as European markets opened lower and Tokyo shares dropped as tech sector worries hit sentiment.
Hong Kong property shares, which had rallied on easing worries over aggressive interest rate hikes, also lost their lustre.
The Hang Properties sub index fell 1.75 percent to 14,630.79. Hong Kong's largest property firm Sun Hung Kai Properties, fell 1.15 percent to HK $64.75.
Telecom firm China Unicom, which had rallied in recent sessions, was the top blue chip loser of the day, falling 4.62 percent to HK $6.20. One bright spot was casual wear retailer Giordano International The firm's shares rose 2.59 percent to HK $4.95 on expectations for strong sales thanks to surge of mainland tourists visiting Hong Kong.