The Hang Seng Index fell 1 per cent to 25,414.21 as of 11.06am local time, halting a five-day gain. The Hang Seng Tech Index dropped 1.6 per cent. On the mainland, the CSI 300 Index slid 0.6 per cent, and the Shanghai Composite Index retreated 0.4 per cent.
Li Auto slid 3.1 per cent to HK$115.10, and peer BYD lost 1.9 per cent to HK$129.40. Alibaba Group Holding shed 1.5 per cent to HK$118.50, while Tencent Holdings sank 0.6 per cent to HK$553.60.
Investors need more conviction from the third round of China-US tariff talks to sustain the momentum that carried the Hang Seng Index to an almost 30 per cent gain this year. It is widely expected that the two nations will extend a 90-day tentative deal reached in April.
“The valuations of Hong Kong stocks have expanded significantly and room for further expansion may be limited,” said Melody Lai, an analyst at SPDB International in Hong Kong. “Going forward, the impact of the tariff may be reflected in fundamentals. We need to spot these stocks with less exposure to tariffs.”
The Hang Seng Index rose by nearly 3 per cent this week as fears faded that the US tariff approach would derail global growth and stoke inflation. The US struck a deal with Japan, imposing a lower-than-expected 15 per cent rate, and is reportedly close to reaching an agreement with the European Union that would not trigger retaliation from the bloc.
