Hong Kong stocks fell the most in nearly three months on Thursday with energy giants leading the decline after crude oil prices dropped overnight. The widely-expected US interest rate rise next week has hurt market sentiment with investors concerned about a weakening yuan and growing capital outflows, analysts say. The Hang Seng Index ended down 1.2 per cent, the largest decline since mid-December, to 23,502 while the Hang Seng China Enterprises Index dropped 1.8 per cent to 10,096. Energy companies dropped sharply after oil prices tumbled more than 5 per cent in the US. Coal-mining firm China Shenhua Energy plunged 3.6 per cent to HK$15.9. PetroChina, the mainland’s largest offshore crude oil producer, lost 2.5 per cent to HK$5.7. Casino operator Sands China was the only gainer in the Hang Seng Index after Macquarie upgraded it to “outperform”. Its shares rose 0.3 per cent to HK$33.8. “As it’s almost 100 per cent certain that the Federal Reserve will raise interest rates this month, the Hong Kong bourse is facing mounting pressures of possible capital outflows,” said Hannah Li, an analyst at UOB Kay Hian. Ben Kwong Man-bun, executive director of KGI Asia, agreed that investors would refrain from buying stocks ahead of the interest rate rise. “The stronger US dollar is causing a chain of negative impacts here,” Kwong said. “It pushes commodity prices lower and causes the yuan to weaken, and people start to worry about the profitability of Chinese companies.” In the offshore market, the yuan hit its weakest point against the greenback in more than two months on Thursday. On the mainland, the benchmark Shanghai Composite Index closed down 0.7 per cent to 3,217 while the blue-chip CSI 300 slipped 0.6 per cent to 3,427. The Shenzhen Component Index lost 0.7 per cent to 10,421 and the Nasdaq-like ChiNext fell 0.5 per cent to 1,953. China’s producer price index rose 7.8 per cent in January, its fastest pace since 2008, but consumer inflation slowed to a lower-than-expected 0.8 per cent, according to data released in the morning. As it’s almost 100 per cent certain that the Federal Reserve will raise interest rates this month, the Hong Kong bourse is facing mounting pressures of possible capital outflows Hannah Li, analyst, UOB Kay Hian Papermaking, oil and coal mining stocks were the biggest losers on the mainland bourses, while shares in artificial intelligence (AI) and aviation companies led the advances. AI was given a boost early in the week by Chinese Premier Li Keqiang’s speech on Sunday, in which he vowed to support the country’s innovative industries, but the shares mostly retreated on Wednesday. The sector became a bright spot again on Thursday. Shenzhen Sunwin Intelligent rose by its 10 per cent daily limit to 20 yuan and Wisesoft, a software company in central China, rose 2.2 per cent to 29.9 yuan. Overnight, energy companies led losses in US markets. The sector slid 2.5 per cent, its biggest decline in four months. The Dow Jones Industrial Average fell 69.1 points or 0.3 per cent to 20,855.6 and the S&P 500 lost 5.4 points or 0.2 per cent to 2,363. The Nasdaq Composite added 3.6 points, or 0.06 per cent, to 5,837.6. Investors are closely watching US non-farm payrolls data due to be released on Friday, which includes private and public sector jobs, and is seen as a barometer of the US economy. Sentiment was boosted by a robust US ADP National Employment report that showed 298,000 jobs were added to the country’s private sector last month. That increased the already strong likelihood that the Federal Reserve will raise interest rates at its meeting next week. In Asian trading, the Nikkei 225 in Tokyo climbed 0.3 per cent to 19,319 as the yen weakened against US dollar, while the Kospi in South Korea shed 0.2 per cent to 2,091. Australia’s S&P/AXS 200 lost 0.3 per cent to 5,741. Geopolitical issues have been weighing on Asian stocks this week after North Korea fired four ballistic missiles on Monday, three of which fell into Japanese waters. The deployment of the US-backed missile defence system known as THAAD on South Korean soil has angered Beijing, leading to a boycott of some Korean products and services in China.