Hong Kong stocks sank to their lowest level since last November yesterday as international investors pulled money out of the local market amid a bird flu scare on the mainland and put it instead into more bullish Japanese and US equities. The Hang Seng Index dropped 2.73 per cent to 21,726.9 points, the lowest since November 28. Trade of about HK$77.2 billion was recorded yesterday, around 34 per cent higher than the 30-day average, according to data from Bloomberg. Some analysts said the decline - the steepest among major Asian markets and a sharp contrast to the day's 1.58 per cent gain in Tokyo - was overdone. "It fell too much," said Lyncean Securities managing director Francis Lun Sheung-nim. "I doubt if this bird flu scare will come anywhere close to the scale seen during the Sars epidemic as the public and the government are much better prepared. There should be a rebound as soon as there are signs that it is under control." I doubt if this bird flu scare will come anywhere close to the scale seen during the Sars epidemic as the public and the government are much better prepared. There should be a rebound as soon as there are signs that it is under control The new H7N9 bird flu has infected 16 people in eastern China, and six have died since February. There is no evidence of human-to-human transmission of the virus yet. Another factor weighing on already weak confidence in Hong Kong shares is the escalating tension on the Korean Peninsula, but analysts played down the threat, citing the sharp gains seen in Japan, which stands to suffer more than China in the event of a full-blown military crisis. Kenny Tang Sing-hing, general manager at AMTD Financial Planning, said investors are chasing a bull market in Japan, where the central bank has announced an aggressive bond-buying programme to push down already-low interest rates, stoke inflation and stimulate investment. "The Hong Kong market's weakness is more due to fund flows rather than fundamentals," Tang said. "Money has been flowing to Japan on the monetary easing theme, and to the United States, where recent data suggest the economic recovery is taking hold." In contrast, the Hang Seng Index, which is increasingly representing mainland companies, has been weighed down by concerns about slowing economic growth across the border. The Hang Seng is trading at 10.4 times its constituent companies' estimated earnings, far below the 25.9 times of the Nikkei 225 and also off the Dow Jones Industrial Average's 14.2 times and Euro Stoxx 50's 14.5 times. Tang said it was hard to predict when the money flow would reverse, but given that Hong Kong stocks were cheap, the potential for further downside was limited. The aviation sector was hit worst yesterday, with the three biggest mainland airlines - Air China, China Eastern and China Southern - falling 8.3 per cent to 9.8 per cent. Hong Kong flag-carrier Cathay Pacific Airways shed 4.1 per cent. Of the index's 50 constituents, 28 fell more than the benchmark's fall. The sole gainer was China Resources Enterprises, up 0.85 per cent.