The Hang Seng Index opened in negative territory and tumbled more than 500 points during trading. It later pared some of the losses to close down 193 points, or two-thirds of a percent, at 29,113.
Turnover was a hefty HK$239.8 billion.
The biggest loser on the index was Xiaomi. The mainland smartphone maker sank 4.8 percent after some users reported that they could not download Google mobile services using the Android-based operating system it developed, and UBS reiterating its warning about risks over a US investment ban on the stock.
But Ping An Insurance jumped 2.1 percent to become the best-performing blue-chip stock despite reporting its first annual drop in profit since 2008.
Alibaba ended up about half a percent after choppy trade, as investors eyed the details of its US$5 billion bond deal.
Across the border, a spike in short-term interest rates raised fears that Beijing would tighten its policies to rein in stock and property prices. The Shanghai Composite Index edged down 0.4 percent, while blue-chip CSI300 index shed 0.2 percent. The Shenzhen Composite index lost more than 1 percent.
Elsewhere in the region, Tokyo’s Nikkei 225 retreated about 1 percent. The Kospi in Seoul gave up 1.4 percent. Taiwan ended a three-day winning streak to close 0.4 percent lower. Sydney trimmed 0.9 percent and Singapore fell about the same amount.
In commodities, oil prices rallied thanks to a pledge by producers to stick with their output policy towards steady supply cuts.
In currencies, the greenback reached its highest levels in about two months, supported by rising US yields.