HONG KONG: Hong Kong shares started the last quarter of 2023 sharply lower on Tuesday as U.S. Treasury yields reached 16-year highs, pressuring global markets.

The Hang Seng Index dropped 2.7% to its lowest since November 2022. The Hang Seng China Enterprises Index fell 3.2%, while the Hang Seng Tech Index lost 2.6%.

Hong Kong markets were closed for a public holiday on Monday and Mainland China markets are closed this week for the Golden Week holiday. The China-Hong Kong Stock Connect program also suspended trading for the week.

China’s factory activity expanded at a slower pace in September, a private-sector survey showed on Sunday, with sluggish external demand weighing on the outlook even as output increased.

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Hong Kong trading volumes are typically muted during China’s Golden Week, analysts said, but the hawkish U.S. Federal Reserve stance on keeping interest rates higher for longer continues to weigh on the market.

The yield on benchmark 10-year U.S. notes hit their highest since 2007.

All major sectors including tech, property and banking declined. Hong Kong property giant New World Development tumbled 5.3% to a near 20-year low due to a net profit decline and payout cut.

“If we don’t get some good news, it’s going to be a bad week,” said Steven Leung, director of institutional sales at UOB Kay Hian in Hong Kong, adding that markets generally are very nervous about U.S. rates.

Shares of China Evergrande resumed trading on Tuesday, days after the embattled developer said its billionaire founder was being investigated over unspecified crimes. Its shares jumped more than 40% after the market opened and closed 28% higher.

“Speculators are buying Evergrande, but there’s still a lot of uncertainty in the Chinese property sector,” Leung said.

Hong Kong-listed mainland property firms fell 3.6%.