Hong Kong stocks plummeted 601.71points, or 2.67 percent, to close at 21,936.73 on Monday, following the fall in the Wall Street on Friday as investors were panic about possible worsening mortgage problems in the U.S..

The total market capitalization dived to 16.36 trillion HK dollars (2.09 trillion U.S. dollars), with about 532 billion evaporating on Monday. Turnover rose slightly to 78 billion HK dollars from 74 billion on Friday.

China Mobile and HSBC, the two biggest constituents of the HangSeng Index, fell on profit-taking, traders said. Their declines contributed to 33 percent of the 601-point fall of the Hang Seng.

Dealers said hedge funds continued selling down shares in afternoon trade to raise funds for covering possible losses from their exposure to the U.S. sub-prime market, dragging down even Hong Kong-listed Chinese mainland stocks despite record-breaking gains in the mainland markets.

Many retail dealers followed suit, putting additional pressure on the market, while other investors opted to await the outcome of the U.S. Federal Reserve meeting later this week for clues on the direction of interest rates.

However, some analysts said that the recent fall in the markets provided opportunity to buy quality stocks.

"Global stock markets have hit fresh record earlier, and a recent correction triggered by the U.S. subprime problem was both healthy and necessary," JP Morgan's managing director and head of markets for China Jing Ulrich told a press conference.

Ulrich did not expect a bear is ushered as global economic growth remains robust, mainly driven by emerging markets and China. She believed the pullback provides a buying opportunity.

In the finance sector, the six mainland banks slipped. ICBC, CCB, Bank of China and CM Bank shed 3.65 percent to 4.43 percent. Bankcomm hoped to be included into blue chips this Friday was down1.06 percent, and CITIC Bank down 2.23 per cent.

The three mainland insurers moved individually. PICC P&C that has sharply risen and fallen recently slid 0.98 percent. China Life and Ping An dived 4.35 percent and 4.91 percent.

On local bank stocks side, HSBC was down 1.46 percent, Hang Seng Bank down 2.09 per cent, Bank of East Asia down 4.13 percent, BOC HK down 2.84 percent, and StanChart down 2.78 percent.

Mainland property stocks declined across the board. Country Garden that won the bid for four sites suffered less loss comparatively, down 0.51 percent. China Overseas, a dark horse to be included into blue chips, sagged 2.48 percent. Shimao Property, China Res Land, R&F Properties and Agile Property dropped 1.69 percent to 4.71 percent.

Resource stocks weakened. PetroChina and Sinopec Corp dived 3.42 percent and 3.24 percent; coal stocks dropped, China Shenhua, China Coal and Yanzhou Coal down 5.08 percent to 6.23 percent.

Aviation stock Air China was down 4.17 percent, China South Air down 4.79 percent, and Beijing Airport down 8.48 percent. On shipping and port stocks front, China Ship Dev was down 6.38 percent, COSCO Holdings down 4.2 percent, Oriental Overseas down 4.65 per cent despite announcement of a surge in net profit just now.

Semi-fresh Fosun Intl was down 3.75 percent, C Transmission down 1.73 percent, Ch Automation down 6.17 percent, Anta down 0.85percent, Tiangong Int'l down 7.54 percent, and Vinda Int'l down 3.34 percent. (One U.S. dollar equals 7.820 HK dollars)

Editor: Donald