Hong Kong blue chips ended 1.05 percent lower on Tuesday amid cautious trading as investors eyed a US Federal Reserve meeting where an interest rate hike is widely expected. Concerns that investors were withdrawing funds from the territory were also stoked by a weaker Hong Kong dollar. The Hong Kong Monetary Authority bought HK $3.82 billion overnight to support the sagging local currency. The blue chip Hang Seng Index ended 143.43 points, or 1.05 percent, lower at 13,578.26.
"Investors are worried about a possible US interest rate hike, and with the holiday coming up, people would rather see cash instead of shares," said Alfred Chan, chief dealer at Cheer Pearl Investment Ltd.
"We expect the Hang Seng to test the 13,300-point level this week," he added.
Turnover totalled HK $18.3 billion (US $2.3 billion) compared to HK $16.5 billion at Monday's close, and is expected to dwindle ahead of next week's Lunar New Year holidays. The local market will be shut for three days starting next Wednesday.
Traders said investors were worried that Hong Kong, whose currency is pegged to the US dollar, may follow the Fed in raising interest rates.
Local banks have been able to resist recent rate hikes thanks to an abundance of funds in the city's banking system and soft loan growth. The Fed's two-day policy meeting opens on Tuesday.
"Hong Kong banks didn't follow the US interest rate hike last time, but some are afraid that the interest rate gap will grow to a point that Hong Kong will have to raise rates," said Y.K. Chan, strategist at Phillip Securities.
Sinochem Hong Kong Holdings fell 8.77 percent to HK $0.26 as investors grappled with news that Chinese state oil trader Sinochem Corp has agreed to sell a fertiliser firm to the company for HK $5.05 billion (US $647.4) in a reverse take-over.
China Gas Holdings Ltd fell 5.3 percent to HK $1.43, on a plan to sell a strategic stake in the company to state-run Korea Gas Corp.
Yanzhou Coal Mining Co fell 2.26 percent to HK $10.80 after a UBS research report said China's largest listed coal producer expects its coal prices to rise between 10 and 17 percent this year, although output was seen flat at 40 million tonnes.
AS Watson's take-over offer for French perfume retailer Marionnaud will open on February 1, French market regulator the AMF confirmed on Monday.
AS Watson is the retail subsidiary of ports-to-telecoms group Hutchison Whampoa Ltd, whose shares fell 1.76 percent to HK $69.75.