China and Hong Kong stocks fell on Wednesday, with the Hang Seng Index sinking most in five weeks, as geopolitical tensions flared up again after Iran launched missiles against US airbases in Iraq. The Shanghai Composite Index dropped 1.2 per cent, or 38.91 points, to 3,066.89 at the close on Wednesday. The Hang Seng Index lost 0.8 per cent to 28,087.92, posting its biggest loss since December 4. Gold futures rose for an 11th consecutive day and crude oil contracts traded close to a seven-month high after Iran launched more than a dozen missiles against US military forces in Iraq, in retaliation for the killing of a top military general in a drone attack last week. As caution prevailed and a risk-averse mode returned, major stock markets in Asia all headed south, following cues from a sell-off in US equities in overnight trading. “Global Equities are being hit, and the need for defensive strategies is paramount,” said Stephen Innes, strategist at AxiTrader. “There is no denying the enormity of long-term geopolitical repercussions of the latest events as oil, bond and gold defensive strategy flows are providing the lead-in for local cash.” Traders will also be keeping a close eye on China’s inflation number, which is expected to be released on Thursday morning. Inflation might have accelerated to an eight-year high of 4.7 per cent in December, while factory-gate prices continued to drop, according to estimates by analysts surveyed by Bloomberg. Brokerage, technology and agricultural stocks topped the list of worst performers on the mainland. Nanjing Securities fell 4.9 per cent to 12.55 yuan and Hongta Securities declined 4.8 per cent to 15.85 yuan. Hubei Century Network Technology dropped 6.4 per cent to 16.54 yuan and Yuan Longping High-tech Agriculture plunged by 9.9 per cent to 18.16 yuan. Shanghai Xinnanyang Only Education & Technology, which runs businesses ranging from K12 education to foreign-language training, fell 0.5 per cent to 18.08 yuan. The Shanghai Stock Exchange sent an inquiry letter to the company, questioning the legality of ousting the company president and appointing its chairman to take his place at a board meeting this week. Yusys Technologies jumped by the 10 per cent daily limit to 33.43 yuan after Baidu’s China unit bought a 5.7 per cent stake in the developer of software for internet finance. Baidu bought the stocks for 600 million yuan (US$86.4 million) from two shareholders that are backed by state-owned China Everbright, Yusys said in an exchange statement. In Hong Kong, airline stocks fell amid concerns that their profitability will be further eroded by higher jet fuel prices. Air China, the country’s flag carrier, retreated 3.4 per cent in Hong Kong to HK$7.47, while its mainland-traded shares lost 2.7 per cent to 9.05 yuan. Cathay Pacific Airways, Hong Kong’s hometown carrier, fell 0.7 per cent to HK$10.86. Construction contractor Kwan Yong Holdings fell 7.69 per cent from its initial public offering price to 60 Hong Kong cents on its first day of trading.