Slowing growth in the US 'is certainly making people nervous', said Renault Kam, a director at Atlantis Investment Management. 'High oil prices are also raising costs.'

The Hang Seng has lost 15.1 per cent so far this month as investors fret the US subprime crisis and signs of economic instability on the mainland will spark a market rout.

Oil was approaching US$100 a barrel yesterday, fuelled by a weakening US dollar and tight global supply, raising the spectre of soaring energy costs for companies and consumers.

Federal Reserve policymakers cut their growth forecast for next year to as low as 1.8 per cent, below the previous estimate of 2.5 to 2.75 per cent as concerns about a recession in the housing industry deepened.

The gloomy news sent European and US markets down in trading yesterday. The FTSE 100 Index in London was down 139.2 points or 2.24 per cent in late afternoon trade, while the Dow Jones Industrial Average was off 173.71 points or 1.34 per cent at midday. Oil was trading firmer at about US$98.20.

The H-share index tumbled 5.18 per cent to close 873.88 points lower at 15,993.5 amid fears Beijing will lift interest rates to tame runaway growth.

Interest rate-sensitive property shares were the biggest losers amid the slump, with Cheung Kong (Holdings) declining 5.73 per cent, Sun Hung Kai Properties sinking 5.81 per cent and Wharf (Holdings) dropping 6.34 per cent.

Hong Kong led losses across the Asian region, paced by a 1.5 per cent slide in Shanghai, a 2.46 per cent loss in Japan and a 2.27 per cent decline in Taipei.

The yen hit a 30-month high against the US dollar, prompting investors to offload riskier carry trade positions, in which an investor borrows in a cheaper currency to fund investments in higher-yielding currencies.

Chan Yuk-keung, a fund manager at Philip Asset Management, said volatility in the market was likely to continue.

'November has been a tough period for the index as negative news from both the mainland and overseas especially the US shadowed the market performance,' Mr Chan said.

'There may be a supporting point for the Hang Seng Index at the 25,000-point level, but that may be broken very soon.'

Despite the short-term uncertainty, some investment banks were still comfortable with the prospects for the market due to healthy earnings.

Sunny Wong Chung-mun, a managing director of equity sales and research at BOC International, said the market would trade at 25,000 to 26,000 points this month and would return to the 30,000 level by the end of the year.

Mr Wong said the bull market would continue next year with the Hang Seng Index expected to climb to about 40,000 in the third quarter.