Hong Kong stocks dived 571.55 points, or 3.81 percent, to close at 14,415.91 on Thursday amid a new selling wave of blue-chip companies triggered by institutional investors' reduction of their holdings in Chinese banks.
The benchmark Hang Seng Index fell 231.65 points, or 1.55 percent, to open at the day's highest 14,755.81 and widened its losses afterwards.
The index once plunged as much as 653.31 points, or 4.36 percent, to the day's lowest 14,334.15 near closing before picking a little bit to close at 14,415.91.
Among 42 components of the Hang Seng Index, declining companies greatly outnumbered gainers 36 to 6.
Turnover weakened to 55.52 billion HK dollars (7.17 billion U.S. dollars) from Wednesday's 90.02 billion HK dollars (11.62 billion U.S. dollars due to the massive placement in Chinese banks.
Market sentiment worsened amid reports that Bank of America hascut 5.6 billion shares of its holdings in China Construction Bank to 16.6 percent from 19.1 percent in a placement worth 2.8 billion U.S. dollars on Wednesday.
China Construction Bank, the country's third largest lender, continued to fall 4.43 percent to 3.88 HK dollars.
Hong Kong' wealthiest tycoon Li Ka-shing has also sold on Wednesday 2 billion shares of Bank of China, the country's second largest lender, to raise 524 million U.S. dollars through his private foundation.
Bank of China plunged 8.41 percent to 1.96 HK dollars.
Other Chinese banks and insurers were also under selling pressure. ICBC, China's largest lender, lost 6.82 percent to 3.69 HK dollars. Bank of Communications dropped 4.9 percent to 5.63 HK dollars. China Merchants Bank slumped 7.06 percent to 13.7 HK dollars. China Life, the country's largest insurance company, sank3.27 percent to 23.65 HK dollars. Ping An, China's second largest insurer, weakened 6.02 percent to 39.8 HK dollars.
Lenovo, China's largest personal computer maker, pummeled 26 percent to 1.91 percent after the company announced on Thursday it would slice 2,500 employees worldwide in the first quarter of 2009and reduce executive compensation by 30 to 50 percent. The job cuts account for about 11 percent of Lenovo's workforce.
From the restructuring actions, Lenovo hopes to save about 300 million U.S. dollars in the 2009/2010 fiscal year but warned a loss for the third quarter ended Dec. 31, 2008, was also expected.
"Although the integration of the IBM PC business for the past three years was a success, our last quarter's performance did not meet our expectations," Yang Yuanqing, Lenovo's chairman of the board, said in a statement.
"We are taking these actions now to ensure that in an uncertain economy, our business operates as efficiently and effectively as possible, and continues to grow in the future," Yuan added.
Telecommunication companies in the Chinese mainland continued to move downwards as investors locked in profits from previous rallies as China issued the long-awaited third generation mobile phone licenses to three mobile operators China Mobile, China Telecom and China Unicom on Wednesday.
China Mobile, the bourse's largest stock by capitalization, dropped 3.12 percent to 76 HK dollars. China Unicom, the country's second largest mobile phone operator after China Mobile, slumped 7. 4 percent to 8.51 HK dollars. China Telecom went down 5.61 percent to 2.86 HK dollars.
Market heavyweight HSBC, which accounts for the largest weighting of the index, dipped 1.33 percent to 74 HK dollars.
HKEx, the stock market's sole operator, fell 6.38 percent to 78. 5 HK dollars.
China Enterprises Index, a gauge that reflects the performance of 42 companies registered in the Chinese mainland, plunged 488.66points, or 5.88 percent, to close at 7,760.02.
China's energy companies were all down. PetroChina, the largest oil producer in China, lost 5.24 percent to 7.06 HK dollars. Sinopec, Asia's largest refiner, slumped 5.98 percent to 4.72 HK dollars. CNOOC, China's largest offshore oil company, went down 6.71 percent to 7.37 HK dollars. (7.75 HK dollars = 1 U.S. dollar)