The benchmark Hang Seng Index plunged as much as 697 points, or 2.95 percent, to 22,954 points in early trading, hitting a three-month low, with analysts warning that Hong Kong shares could fall to 22,500 points in the fourth quarter.
Hong Kong stocks remained under pressure from a tech selloff, with heavyweights Alibaba (9988) and Tencent (0700) falling 6 percent and 3.5 percent, respectively. NetEase (9999) and Xiaomi (1810) dropped 6.8 percent and 4 percent, while Lenovo (0992) tumbled 8.9 percent as the worst-performing blue chip.
By midday break, the Hang Seng Index dropped 679 points, or 2.87 percent, to 22,971 points, delivering a half-day market turnover of HK$127 billion.
Hang Seng Tech Index also slumped 185 points, or 4.64 percent, to 3,809 points, a two-year low.
Dicky Wong, executive of research at uSmart Securities, said Hong Kong shares could test 23,300 points, with the fourth quarter potentially edging towards this year's low of 22,500. He cited reports that several mainland tycoons may need to sell shares to pay tax as one possible factor behind the weak performance.
Alan Li, chief investment officer at Blue Water Capital, added that mainland and Hong Kong markets have been weighed down by sentiment around artificial intelligence developments, concerns that the US Federal Reserve will raise interest rates further, China's economic slowdown, and mainland wealth tax enforcement.
Li said the mainland tycoons may raise funds to pay tax by reducing their shareholdings, borrowing from listed companies, or asking listed companies to help cover the tax. All three approaches would be detrimental to the share price performance of the listed companies.
In the mainland, the Shanghai Stock Exchange Composite Index fell 33 points, or 0.89 percent, to 3,679 points, and the Shenzhen Stock Exchange Composite Index dipped 1.78 percent to 11,496 points.
