Hong Kong shares fell more than 5 percent on Thursday, wiping out almost a week's gains, as Europe's escalating debt crisis and weak results from the likes of HSBC Holdings sent investors rushing for the exits. Financials bore the brunt of the sell-off, with Chinese banks under additional pressure after Goldman Sachs' sold parts of its stake in top lender Industrial & Commercial Bank of China.
HSBC, Europe's top lender, fell 9.1 percent as borrowing costs in Italy surged to near unsustainable levels, while ICBC tumbled 8.7 percent, its biggest fall in three years. The two accounted for over a third of the Hang Seng's more than 1,000 point drop on the day. The Hong Kong benchmark index ended 5.3 percent lower at around 18,964, while the Shanghai Composite fell 1.8 percent to 2,480.
Turnover remained relatively high and at HK$74.7 billion was about 11 percent higher than this month's daily average. The escalating political and economic crisis in Italy are spurring fears of a break-up of the eurozone, eclipsing further turmoil in Greece.
"Europe and US futures are indicating a lower open as fears of contagion grow. Lots of rumours are circulating but what the market wants is clear facts," said a Hong Kong-based trader at an American brokerage. "All sectors were hit today and I expect investors to review their portfolios on the basis of exposure to Europe," the trader said.
Underscoring the tough environment for banks, HSBC gave its starkest warning to date that new regulations might force it to leave Britain while at the same time reporting a 36 percent fall in third quarter profit as the eurozone debt crisis hit investment bank income.
Rival Standard Chartered fell 4.8 percent. Chinese property counters also continued to lag as investors remained bearish on the sector's prospects. China's property sales fell in October for the first time in six months, confirming anecdotal evidence that the real estate market is weakening across the country under a slew of government measures meted out since late 2009.
In Hong Kong, shares of China Overseas Land & Investment fell 4.9 percent while Sino-Land dropped 6.6 percent. On the mainland, China Vanke, the country's largest property developer, shed 1.3 percent. Poly Real Estate fell 2.5 percent. Bucking the slide across markets, liquor stocks were a relative bright spot in Shanghai and Hong Kong. Kweichow Moutai rose 0.4 percent while China's second-largest brewer by volume, Tsingtao Brewery, rose 1 percent.