Hong Kong stocks ended down 1.13 percent on Monday as investors dumped equities on worries that soaring oil prices will restrict global economic growth and corporate profits.
The benchmark Hang Seng Index lost 140.08 points to close at 12,219.75. Turnover totalled HK $8.9 billion (US $1.14 billion), lighter than HK $9.1 billion on Friday.
High oil prices and mixed US economic data have curbed investor sentiment.
"We opt to hold cash rather than equities because there are no signs that the stock market will do well," said Louis Kwan, a director at First Shanghai Investment Management Ltd.
US crude oil futures eased to US $46.20 a barrel late on Monday, off an early peak of US $46.91 on news Venezuelan President Hugo Chavez had survived a referendum to recall him, easing fears that there might be disruption in supplies from the world's fifth-largest oil exporter.
Most local blue chips ended in negative territory, led by index heavyweights such as HSBC Holdings Plc and China Mobile (Hong Kong) Ltd.
HSBC slipped 0.42 percent to HK $117.50. Sources said HSBC, the world's third-largest bank by assets, and Japan's Shinsei Bank are vying for Aplus Co, Japan's fourth-ranked consumer finance firm.
China Mobile, the country's top wireless phone operator, lost 2.26 percent to HK $21.65 ahead of its earnings on Wednesday with investors wary of the slowing technology sector.
Trading firm Li & Fung Ltd was the top blue chip loser, extending losses from previous sessions.
Investors are concerned that the abolition of US quotas on Chinese textiles in 2005 could trigger steep deflation in textile prices and volume, hurting the firm's future growth.
The counter fell as much as 7.07 percent at one point to an intraday 15-month low of HK $9.20 before recovering to HK $9.35.
"Investors no longer see Li & Fung as a growth stock, but rather a dividend play," said Herbert Lau, a research director at Celestial Asia Securities.
Hong Kong's main broadcaster Television Broadcasts Ltd and Shanghai Industrial Holdings, a conglomerate backed by the Shanghai municipal government, were sold off after the pair were demoted from the blue chip index.
The changes, effective from September 6, will require fund managers who benchmark their performance to the index to adjust stocks in their portfolios.
TVB fell 4.66 percent to HK $30.70 while Shanghai Industrial edged 4.14 percent lower to HK $12.75.
Denway Motors Ltd, the Chinese partner of Honda Motor Co, and ports and infrastructure firm China Merchants Holdings Ltd bucked the declining trend after they were added to the index.
Denway jumped as much as 7.41 percent to HK $2.90 at one point, before easing to HK $2.775, up 2.78 percent. China Merchants reversed course to end the session 1.38 percent lower at HK $10.75.
Among smaller retail counters, Lifestyle International Holdings Ltd, which operates the city's Sogo department store in the Causeway Bay shopping area, defied the market downtrend, jumping 8.6 percent to HK $10.10 ahead of its first-half results.
After the close, the firm said first-half net profit more than doubled to HK $184.87 million and proposed a special dividend of 2.7 HK cents per share.
First Pacific Co Ltd extended morning losses, ending 8.43 percent lower at HK $1.90 after announcing a lower-than-expected first-half net profit of US $54.7 million.