The Hang Seng Index fell 1.68 per cent in ultra-thin trade yesterday amid fears of rising interest rates and concerns about a devaluation of the Chinese yuan. The Hang Seng Index fell 221.59 points to 12,945.47. Turnover shrank to $3.54 billion, the lowest in four months. The market followed the 0.73 per cent dip in the Dow Jones Industrial Average last Friday when data showing strong jobs growth last month and a pick-up in hourly earnings suggested United States interest rates would be raised later this month. Higher US rates could push up Hong Kong's interest rates through the dollar currency peg. 'Investors are still concerned about a US interest rate [rise] and that it may be followed by Hong Kong,' KGI Asia associate director Ben Kwong Man-bun said. Kerry Properties rose 2.15 per cent to $9.50 after reporting a rise in sales and interim profits (Stock Split, Page 12). China-related stocks were also hit by continued yuan devaluation rumours. China Resources Enterprise dropped 4.31 per cent to $11.10 and Shanghai Industrial fell 3.95 per cent to $17. The red-chip index slid 47.48 points, or 4.22 per cent, to 1,076.76, while the H-share index fell 19.73 points, or 3.71 per cent, to 510.87. Continuing tension between Taiwan and the mainland also prevented investors from buying in the market. 'Investors cannot find a good excuse to go bargain hunting at this level,' Mr Kwong said. Tricom's new shares, which started trading on Friday, had the second-highest turnover at $312.91 million and closed 2.32 per cent lower at $3.15. Brokers said most of the trading yesterday was among retail investors speculating on the stock. H share Yizheng Chemical rose 2.5 per cent to $2.05 amid rumours its earnings would exceed the consensus estimate of 31 million yuan (about HK$28.91 million) for this year, brokers said. Mainland vehicle maker stocks suffered as the strong Japanese yen pushed up the costs of imported components. Denway Investment fell 10.25 per cent to $1.05 and Qingling Motors dived 9.55 per cent to $1.42. Some brokers felt the negative news had been factored into share prices but the low turnover had left the market prone to manipulation. 'Basically, I think there are a bunch of traders trying to sell down the market and make profits in this quiet and illiquid market,' Amsteel Securities associate director Sean Li Chok-sun said. He felt investors should seek buying opportunities. 'Long-term investors should look into the situation and accumulate slowly in this illiquid market,' he said.