The Hang Seng Index shed 0.5 percent to 19,963, closing below the 20,000 mark for the first time since Aug. 6.
“It’s a given that earnings for Chinese companies are going to be bad, but the prospects for recovery are not so clear,” said Larry Jiang, chief investment strategist at Guotai Junan International Securities. “So you risk being wrong going long, and caught if you go short any more from here.”
He said investors will reward companies with better earnings visibility, even if their shares have outperformed to date.
Traders said the benchmark broke below that chart support after investors rushed to close positions ahead of the weekend with the approaching Typhoon Kai-tak expected to shut markets in Hong Kong on Friday.
In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings shed 0.5 percent to hit its lowest since Jan. 9.
The Shanghai Composite Index slipped 0.3 percent, creeping back towards a low for the year so far that was struck on Aug. 2.
JP Morgan analysts warned investors of value traps in Chinese equities.