Hong Kong stocks posted their biggest one day drop in nearly a year and a half yesterday, down more than 2 per cent, as global financial markets slid on worries about rising interest rates and potential inflation.

Blue chip bellwethers such as China Mobile and offshore oil producer CNOOC Ltd were among the major losers in a broad-based sell off sparked by a steep fall on Wall Street.

China Mobile (Hong Kong) Ltd fell 4.25 per cent, compounding a 3.4 per cent loss on Wednesday. China's top offshore oil producer CNOOC Ltd fell 4.63 per cent to HK$5.15.

"It's the October curse. Every year in October the market feels the pinch from either interest rates or avian flu or whatever. You can bet on a technical rebound in the short term but I don't think we'll really recover until November," said Francis Lun, general manager at Fulbright Securities.

The blue-chip Hang Seng Index fell 2.12 per cent, or 321.73 points, to 14,839.30, dropping to its lowest levels in over five weeks.

Volume was heavy with HK$26 billion (US$3.33 billion) worth of shares exchanged.

Dealers will now be on the lookout for US non-farm payrolls data due out on Friday after the market shuts. The jobs figures are seen as the first major set of economic data to incorporate the effects of Hurricane Katrina, which struck the US Gulf coast in late summer.

Rate sensitive property shares were among the big losers on renewed worries that fresh interest rate rises will dampen strong demand for new homes and commercial space.

Recent data suggested property sales slowed in September as consumers started to respond to higher interest rates. But recent newspaper reports also said new luxury apartments are still fetching record prices.

The Hang Seng properties sub index fell 2.53 per cent. Sino Land Co Ltd, a recent investor favourite, was the worst performing property blue chip, down 4.21 per cent to HK$9.10. The shares have jumped more than 15 per cent over the past three months.

New World Development Co Ltd fell 3.94 per cent to HK$9.75 despite reporting it swung into profit in its last fiscal year thanks to a rebound in the city's property markets and asset sales by its infrastructure arm.

China oil plays reeled after world oil prices dropped to their lowest level in two months after US government data showed a drop in oil demand.

China's largest oil producer PetroChina Co Ltd fell 3.15 per cent to HK$6.15.

Carmaker Denway Motors Ltd and China sourcing and trading firm Li & Fung Co Ltd, were the only two gainers out of 33 Hang Seng component stocks.

Denway Motors, the joint venture of Japan's Honda Motor Co, rose 2.4 per cent to HK$2.77 after it said it would buy 49 per cent of car parts and components maker Guangzhou Automobile Group Component Co Ltd for HK$710 million (US$91 million) in cash.

Li & Fung, one of the top performing stocks so far this year, rose 0.86 per cent to HK$17.55.

Editor: Yan