Hong Kong shares dropped 0.95 percent on Wednesday, wiping out almost all the previous day's gains, as investors brushed off a record close on Wall Street and another rally on the mainland.
The Hang Seng Index fell 225.68 points to 23,428.62 on turnover of HK$123.19 billion ($15.90 billion).
The index began the day on a high, extending the previous day's strong rally, after the Dow on Wall Street closed at another all-time high on Tuesday thanks to strong US data.
The Commerce Department said US construction spending rose 1.1 percent in September, almost twice as much as expected, while AutoData said the car industry saw a healthy 4.6 percent increase in sales last month.
Also, US online sales rose 16 percent year-on-year Monday, according to the Adobe 2014 Digital Index.
Adding to buying sentiment was a healthy run-up in Shanghai, which has been supported by hopes of fresh stimulus measures from China's leaders after the central bank cut interest rates last month.
However, Hong Kong shares turned down in late morning trade on profit-taking and after an index of various indicators by HSBC suggested the city's economy was struggling.
“Hong Kong's economy is still weakening,” said HSBC, adding that pro-democracy protests which have gripped the city for more than two months and blocked some main roads also hurt sentiment.
“Given the weakness in demand from mainland China, the risks to growth remain on the downside,” it added.
Energy giants PetroChina and CNOOC resumed their downward spiral as the price of oil sits at multi-year lows.
PetroChina fell 3.05 percent to HK$7.94 and CNOOC slipped 3.32 percent to HK$10.48.
Cathay Pacific Airways was unchanged at HK$17.40 and Air China lost 3.71 percent to HK$5.71, despite the benefit to airlines of cheaper fuel.
Internet firm Tencent slipped 1.59 percent to HK$117.70 and China Mobile was off 2.25 percent at HK$91.30.
In Shanghai the benchmark composite index gained 0.58 percent, or 15.98 points, to 2,779.53 on turnover of 529.8 billion yuan ($86.3 billion).
The Shenzhen Composite Index, which tracks stocks on China's second exchange, jumped 1.35 percent, or 19.42 points, to 1,452.92 on turnover of 367.9 billion yuan.
However, dealers warned that the chance of a short-term retreat was increasing with the Shanghai index at more than three-year highs.
“It is possible that the market might pare earlier gains and return to previous levels, as it showed quite sharp fluctuations today,” Zhang Yanbing, an analyst at Zheshang Securities, told AFP.
Metals firms led the gains. Shenzhen-listed China Nonferrous Metal Industry Foreign Engineering And Construction Co. surged by its 10 percent daily limit to 13.73 yuan and Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co. jumped 9.03 percent to 25.00 yuan in Shanghai.
But investors took profits in financial shares following gains on Tuesday.
In Shanghai, New China Life Insurance Co. sank 5.95 percent to 40.44 yuan and Bank of China fell 4.21 percent to 3.41 yuan. - AFP