Kingston Lin King-ham, AMTD Securities brokerage director, said southbound inflow slowed as investors see little chance of the Hong Kong benchmark breaking through the 24,000 threshold before the US president election and launch of Shenzhen-Hong Kong Stock Connect.

“China’s tightening measures on home buying has to some extend encouraged capital flow to the A-share market. Although we haven’t seen any sharp movement in A-shares, such expectation could prompt investors to dump holdings in Hong Kong and turn to the mainland,” Lin said.

Carson Pang Wai-san, head of research at Core Pacific-Yamaichi International (HK), said southbound flows saw profit-taking before the “golden week” holiday last week, and without many upsides, investors have continued to “try to bank the profits”.

“The fund flow from China will continue to be narrowed down,” Pang said.

Bank of America Merrill Lynch analysts advised investors in a note to reduce share holdings in Chinese banks and other dual-listed stocks which have benefited greatly in recent months.

“We expect [southbound] flows to weaken, especially if the US dollar continues to strengthen. We expect a further sharp decline in southbound flows once the Shenzhen-Hong Kong Connect opens later this year,” the bank said. “The market has over-played the impact of the Connect programme.”

Banking, transportation and property stocks were offloaded on Wednesday.

Bank of Communications was the worst performer among blue chips, down 2.86 per cent to HK$5.77, followed by a 2.80 per cent drop of Bank of China.

Sun Hung Kai Properties fell 1.14 per cent to HK$113.20 and Sino Land fell 1.94 per cent to HK$13.12.

Tencent Holdings, the most traded stock of the day, dropped 1.11 per cent to HK$213.40.

Restaurant chain operator Tsui Wah Holdings lost 4.11 per cent to HK$1.40 after it announced talks with third-party potential buyers had ceased on a possible disposal.

Despite the market’s losses, Pang said the performance was “not bad,” since the pressure to sell eased on Wednesday compared with the day before.

“In the short-term, the index will continue to consolidate,” he said. “But actually the chance is still high [for a rebound].”

In the mainland, the Shanghai Composite Index ended at 3,058.50, down 0.22 per cent or 6.75 points, halting a four-day rising streak. The CSI 300 index, which tracks companies with high capital value in Shanghai and Shenzhen, fell 0.20 per cent to 3,300.01. Shenzhen Composite Index rose 0.17 per cent and the Nasdaq-like ChiNext lost 0.05 per cent to 2,209.69.

“After two-day rebounds, the overall momentum seems to be a little bit weak today,” Pang said. “I’m worried the Shanghai Composite index still facing high pressure.”

Cement makers saw shares fall after the Ministry of Industry and Information Technology announced a ban on any new production capacity expansion until 2020.

Anhui Conch Cement Co fell 2.61 per cent to 16.45 yuan. Baoshan Iron & Steel Co shares dropped 3.45 per cent to 5.59 yuan while Wuhan Iron & Steel Co lost 2.99 per cent to 3.24 yuan.

China Shipping Container Lines Company saw earlier 4.5 per cent gains narrowed, ending the day down 1.17 per cent. The firm announced a plan to raise 12 billion yuan by issuing A-shares at no less than 3.66 yuan per share to no more than 10 target subscribes, for capital injection in COSCO Shipping Leasing and other purposes.

The US major indexes recorded the biggest percentage decline in nearly a month on Tuesday. The Dow Jones Industrial Average Index fell 1.09 per cent or 200.38 points to close at 18,128.66, while S&P 500 closed 1.24 per cent lower at 2,136.73, and Nasdaq was down 1.54 per cent to close at 5,246.79.

Elsewhere in Asian trading, Japan’s Nikkei 225 shed 1.09 per cent to 16,840.00. South Korea’s Kospi was up 0.09 per cent and in Sydney the All Ordinaries lost 0.13 per cent.