Lingering nervousness on the mainland stock markets again dragged down regional bourses, including Hong Kong's, on Monday as experts warned there is still no positive element at the moment to turn the tide.

Hong Kong stocks began the week with a steep slide, with the benchmark Hang Seng Index closing at a 30-month low. It plummeted 565.21 points, or 2.76 percent, to end at 19,888.5 - the first time it had closed below the 20,000 mark since June 2013.

The Hang Seng China Enterprises Index retreated 3.85 percent to 8,505.16.

Stocks experts attributed the sell-off to a multitude of problems, principally mounting worries over the state of the world's second-largest economy, expectations of further depreciation of the yuan and continued contraction in the nation's manufacturing sector.

They predict that Hong Kong's bourse will remain volatile in the short and medium terms as the result of the unstable domestic and international markets.

"A number of factors, including the slowdown of the mainland's economic growth, the possibility of fresh US interest-rate hikes and plunging oil prices, are affecting Hong Kong's equity markets," said Francis Kwok Sze-chi, managing director of Bright Smart Securities (HK).

Kwok expects stock prices to fall further. "The yuan depreciation process has just begun. It's expected to have a big impact on Hong Kong's stock market. Unless these uncertainties ease, investor sentiment will continue to be damped."

Cai Bin, fund manager of Bosera Funds - one of the first fund management firms established on the mainland - said March will be a crucial month in deciding the future course of the mainland stock markets in 2016. "On one hand, prospects of another US interest-rate hike will become clearer in March. We'll then have a better picture of how many times US rates will go up this year," he said.

"On the other hand, the annual two sessions will be held in March, during which national policies, such as fiscal policies and policies on reform on the supply front, are expected to be announced."

"If share prices continue to drop to levels that are low enough to fully reflect market expectations of US rate hikes, the mainland's debts problem and other factors, then volatility may be reduced and the stock market may exhibit a bullish tendency," Cai said.

He reckoned that stocks of industries benefitting from the country's industrial upgrade and economic transformation are expected to put up a good performance on the mainland markets this year.

The slump on the mainland bourses continued on Monday despite last week's suspension of the "circuit breaker" mechanism, which was blamed for exacerbating the market rout as investors stepped up the sell-off on fears of being locked out.

The Shanghai Composite Index dived 5.33 percent to close at 3,016.7 points, while the Shenzhen Component Index tumbled 6.21 percent to finish at 10,212.46.

The ChiNext Index - the Nasdaq-style board of growth enterprises, also saw a significant drop, losing 6.34 percent to 2,106.36 points.

sally@chinadailyhk.com

An investor rests her head on her hand in front of a screen showing stock market movements at a mainland securities firm. Asia news photo

(HK Edition 01/12/2016 page9)