Hong Kong stocks traded at six-week lows before ending down 1 percent on Friday in a broad-based sell-off triggered by looming geopolitical risks in the Middle East and the prospect of lower corporate profits amid record-high oil prices.
Mounting speculation that China's central bank would soon raise interest rates heightened jitters, hurting rate-sensitive shares such as China Overseas Land and Investment Ltd, down 3.7 percent, and other mainland property developers. The benchmark Hang Seng index fell 169.77 points to finish at 16,135.71, ending down 2 percent for the week.
Hong Kong-listed shares in mainland companies fell 1.2 percent to 6,647.53., for a weekly loss of 2.8 percent. Turnover was at its highest since June 30, totalling HK$28.1 billion (US $3.6 billion), compared to Thursday's HK$26.9 billion.
Some analysts said more correction and volatility could be expected in coming days, especially with US consumer and producer price data due next week.
"In the short-term, the Hong Kong market may head lower towards 16,000, with 15,600 as the near-term support, particularly if (US) inflationary indicators do not fall within expectations," said Alex Tang, research director at Core Pacific Yamaichi International (Hong Kong) Ltd.
But other market watchers said the recent slide signalled a buying opportunity.
"We take quite a positive view that the market will consolidate at the current levels," said Alice Hung, research director at ICEA Securities Asia Ltd "Valuation is at the low end of the historical range...we are quite comfortable accumulating at this level."
But fund managers do not appear ready to take full positions. "Relatively speaking, Hong Kong has held up okay. Money flow is positive in this part of the region, thanks to the interest in China," said Tat Auyeung, fund manager at Apex Capital Management (Hong Kong) Ltd.
"But the dilemma for fund managers now is that you can quantify interest rate and earnings risk, but you can't quantify political risk. Although I'm picking up shares that will do well in the long run, I'm not going to commit fully."
Among the day's biggest losers, mainland property developer China Overseas tumbled 3.7 percent to HK$4.525. Agile Property Holdings Ltd sank 2.3 percent to HK$4.30. Gold miner Zijin Mining Co Ltd was a rare bright spot as investors sought gold as a safe-haven buy. The gold miner rose 1.2 percent to HK$4.15.
Commodity supplier CITIC Resources Holdings Ltd jumped 3.7 percent to HK$1.41 as investors cheered the company's purchase of a 51 percent interest in a small Indonesian oilfield after crude hit a record high above $78 per barrel.