The Hang Seng Index slumped below the 25,000-point level yesterday, with most of its constituent firms falling in the two weeks before October - the usual month for market crashes.
The HSI plunged over 500 points at one stage yesterday and closed 365 points lower, or down 1.45 percent.
Even stocks of firms involved in making car batteries and solar panels fell.
Morgan Stanley slashed its HSI target from 26,900 to 24,400 points for June.
That, it said, is due to Beijing's tightening of various regulations that is pressurizing the profit margins of Chinese stocks and to more prudent forecasts for China's economy.
But the index has almost bottomed out, according to Wilfred Sit Wing-Fai, director and chief investment officer at Hang Seng Investment Management.
Meanwhile, China's Shanghai Composite Index was down for a third day, recording a drop of 1.34 percent, and the Shenzhen Composite Index fell 1.95 percent.
Mainland developers listed in Hong Kong remained weak.
Country Garden (2007) slid 7.3 percent while its property management arm, Country Garden Services (6098), dived 10.7 percent. And Greentown China (3900) and Guangzhou R&F Properties (2777) both plunged about 12 percent.
Macau casino shares also continued to fall, extending a record rout from the previous day as Beijing moved to tighten its grip on the gambling hub. Sands China (1928) lost 8 percent after a 33-percent drop on Wednesday. The National Press and Publication Administration is also reassessing titles submitted for approval by gaming developers, including Tencent (0700) and Netease (9999), to ensure compliance with new rules.
It turned back applications late in August and told developers to resubmit titles with the new mandatory measures built in.
Meanwhile, China's industry ministry published a notice yesterday telling companies to step up cyber and data security oversight measures on connected vehicles.
Shares of automakers BYD (1211) and Geely (0175) lost nearly 4 and 5 percent respectively, while Great Wall Motors (2333) plunged close to 9 percent.
