Hong Kong's top share index closed at a five month low on Thursday, with raw material firms hurt most after China's Premier said the country needed to take "very forceful" action to cool its red-hot economy.
The blue chip Hang Seng Index fell 1.31 percent, or 159.73 points, to 12,005.58 points, its lowest close since November 25 but off a session low of 11,898.18.
The Hang Seng China Enterprise Index, which groups Chinese firms listed here known as H shares, dropped 4.54 percent to 4,069.79 points.
"It looks like China will take more drastic measures to cool down its economy. China stocks, especially metals, are facing heavy selling pressure," said Y.K. Chan, strategist at Phillip Securities.
In an exclusive interview with Reuters late on Wednesday, Chinese Premier Wen Jiabao said action was needed since inflationary pressure was building due to a surge in money supply, credit and fixed investment.
His comments pummelled raw material stocks such as cement maker Anhui Conch, which fell 12.95 percent to HK $8.40. Aluminium Corp of China (Chalco) fell 9.6 percent to HK $4.475 and Jiangxi Copper dived 8.87 percent to HK $2.825.
"I think the market has over-reacted. It's a good time for bargain hunting but you might have to be patient as the market won't rally for while," said Andrew To, sales director at Tai Fook Securities.
China has taken a number of measures, such as raising bank reserve ratios and clamping down on steel, cement and aluminium projects, in recent weeks to rein in its breakneck economic growth.
Coal miner Yanzhou Coal lost 5.84 percent to HK $7.25 despite posting a 51 percent jump in first quarter net profit.
China's largest offshore oil producer CNOOC Ltd lost 2.48 percent to HK $2.95 after it said first quarter unaudited revenue rose 3.8 percent.
Among blue chips, China Mobile Hong Kong Ltd, the world's largest mobile phone firm by subscribers, held up reasonably well after it said it will pay US $3.65 billion for 10 networks from its parent firm.
Analysts said the terms of the deal were favourable and should boost earnings. It ended unchanged at HK $20.80.
Cathay Pacific Airways Ltd, the world's third largest carrier by market value, shed 3.79 percent to HK $13.95 as two suspected Sars patients were confirmed as having the disease in Beijing, raising fears of another regional outbreak. Most blue chips fell but defensive utilities CLP Holdings and Hongkong Electric rose.
They climbed 0.49 percent to HK $41.30 and 0.29 percent to HK $34.10 respectively as investors sought safe havens for their cash.
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