Chief Executive Leung Chun-ying yesterday played down reports the government was considering cutting the number of mainland visitors by 20 per cent.
But that didn't stop the shares of retailers and property developers falling and retailers crying foul.
Leung said the government was "listening to views" about how to handle the annual influx of 40 million mainland visitors, a number that is expected to reach 100 million by 2020.
Some legislators have called for the one-year visas that allow multiple entries, introduced in 2009, to be scrapped.
Pan-democrat lawmaker Claudio Mo Man-ching said yesterday that would effectively reduce the number of mainland visitors by 25 per cent.
"In Causeway Bay, buying a gold necklace is easier than buying a mop," she said. "Multi-entry permits should be halted and the number of individual visitors curbed."
Secretary for Commerce and Economic Development Greg So Kam-leung said the government would gather data on mainland visitors before discussing arrangements with Beijing.
The sight of mainland tourists pouring into the city, inundating public transport and snapping up homes, designer handbags and daily necessities has caused much public discontent.
Protesters have been on the march, demanding the government curb visitors from the mainland under the independent traveller scheme, who accounted for two out of every three visitors to the city last year. Mainland visitors accounted for 7.9 per cent of Hong Kong's inbound visitors in 2003, but this surged to 67.4 per cent last year.
The Hong Kong Retail Management Association warned that reducing those numbers would threaten the job security of the city's 267,000-strong sales workforce and urged the government to create more shopping malls and tourism facilities to ease pressure on existing shopping districts.
Shares in cosmetics retailer Sa Sa closed down 3.79 per cent at HK$5.58, those in jewellery chain Chow Tai Fook fell 3.22 per cent to HK$10.22 and those of fashion group IT lost 2.42 per cent to close at HK$2.42.
Prince Jewellery & Watch chief executive Jimmy Tang said he strongly disagreed with any move to cut visitor numbers.
About 90 per cent of the group's customers are mainland visitors and he expected to see sales suffer if the 20 per cent reduction went ahead.
Wholesale and retail constituency lawmaker Vincent Fang Kang said cutting the mainland visitor numbers by 20 per cent would be "too drastic".
He said the government should stop those mainlanders taking day trips as they were largely parallel-goods traders.
Helen Mak, of Colliers International, said retailers in Mong Kok and northern districts would be hit hardest by any restrictions, as they made profits from large volumes. "A drop in the number of buyers would definitely hit their sales, and consequently rents," she said.
Shares of Hysan, owner of Hysan Place in Causeway Bay, dropped 3.26 per cent to HK$35.60; those of New World Development, the landlord of K11 in Tsim Sha Tsui, dipped 0.22 per cent to HK$8.73. Shares in Wharf, which owns Times Square in Causeway Bay and Harbour City in Tsim Sha Tsui, were down 3.54 per cent at HK$53.10.
A Hysan spokesman said the group had a balanced portfolio of tenants and did not rely on any one group in particular.
Mak recently predicted overall rents in major shopping districts would fall 5 per cent in the next 12 months on the back of more vacancies, with Causeway Bay rents dropping 10 per cent.
Additional reporting by Ernest Kao