The Hang Seng Index fell 1.1 per cent to 16,595.60 as of 11.18am local time, heading for the lowest close since December 20. The Hang Seng Tech Index dropped 2.2 per cent, while the Shanghai Composite Index slipped 0.1 per cent.

Alibaba Group Holding slid 2.6 per cent to HK$72.75. JD.com slumped 3.9 per cent to HK$105.60 and search engine operator Baidu eased 3 per cent to HK$111.90. Smartphone maker Xiaomi lost 3.1 per cent to HK$15.04 and the city’s subway operator MTR shed 4 per cent to HK$28.65.

Both Hong Kong and Chinese stocks started the new year on a poor note, with benchmarks falling on the first trading day on Tuesday. Investors remained skittish after an official report showed China’s manufacturing shrank for a third consecutive month in December, indicating a lingering weakness in the economy, and declines in home sales of the top 100 developers deepened.

“We expect China’s property downturn to continue, with the pace of decline slowing,” Goldman Sachs said in a report on Tuesday night. “Reflecting these headwinds, China macro policy should ease further and the overall debt-to-GDP ratio is likely to increase meaningfully in 2024.”

Sentiment took a hit after rallies in US tech stocks and bonds fizzled out, with traders dialling back their bets on the Federal Reserve lowering borrowing costs any time soon. Investors are awaiting the minutes of the last Fed policy meeting and an array of jobs data due later in the week.

Sanctioned stocks, shunned by US investors, are top performers for Chinese funds

His removal from the post comes after a contentious draft proposal governing the industry triggered backlash among traders and led to a rout in gaming stocks from Tencent to NetEase last month.

Rongsheng Petrochemical added 0.2 per cent to 10.29 yuan in Shenzhen after it signed an agreement to buy a 50 per cent stake in a refinery from Saudi Aramco.

SolaX Powe Network Technology, which makes energy storage batteries, jumped 68 per cent to 93.40 yuan in Shanghai on the first day of trading.

Other major Asian markets fell. South Korea’s Kospi retreated 2 per cent and Australia’s S&P/ASX 200 lost 1 per cent, while Taiwan’s Taiex slid 1.7 per cent. Japan’s market is yet to reopen for trading in the new year.