A sell-off in mainland stocks also soured investor sentiment, with Chinese companies listed in Hong Kong leading declines.
The benchmark Hang Seng Index closed down 696.89 points, or 2. 61 percent, to 25,966.98, after trading between 25,617.78 and 26, 631.51.
Turnover totaled 186.13 billion HK dollars (about 24.02 billion U.S. dollars), rising from 151.28 billion HK dollars on the previous trading day.
The Hang Seng China Enterprises Index fell 393.53 points, or 3. 01 percent, to close at 12,694.66.
Four sub-indices all lost ground, with the Finance sub-index falling the most by 3.12 percent, followed by the Commerce and Industry 2.39 percent, the Properties 1.89 percent and the Utility 0.6 percent.
Banking giant HSBC, which accounts for the largest weighting of the Hang Seng Index, fell 2.36 percent at 70.25 HK dollars, while its local unit Hang Seng Bank closed down 0.98 percent to 150.8 HK dollars. Local bourse operator HKEX lost 3.24 percent at 275 HK dollars.
Legend Holdings plunged 5.67 percent to 10.32 HK dollars on its first day of trading after the parent of computer giant Lenovo Group, the world's biggest PC maker, raised 1.96 billion U.S. dollars in an initial public offering.
Local developers Hang Lung Properties slid 1.29 percent to 23 HK dollars. Henderson Land, another major developer in Hong Kong, declined 2 percent to 52.3 HK dollars. CKH Holding, a powerful HK- based developer controlled by billionaire Li Ka-shing, retreated 1. 58 percent to 112.4 HK dollars.
As for mainland-based financial stocks, China Construction Bank, the country's second largest bank which accounts for the third largest weighting of the Hang Seng Index, went down 2.26 percent to 6.93 HK dollars. ICBC, the world's largest bank by market value, was down 2.8 percent to 6.1 HK dollars. Bank of China slid 2.19 percent to 4.92 HK dollars.
PetroChina, the country's largest oil and gas producer, decreased 0.8 percent to 8.68 HK dollars. Sinopec, the nation's biggest oil refiner, closed down 1.95 percent to 6.53 HK dollars.