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Property firms suffered hefty losses in Hong Kong on Friday as the arrest of leading pro-democracy figures wiped out an early rally in the Hang Seng Index, fuelled by fears of fresh violence in the city.
News of the arrests overshadowed a broad advance across other Asian markets that came after China said it would not retaliate against the latest US tariffs, which raised hopes for an easing of trade tensions between the economic giants.
Police on Friday held Joshua Wong and Agnes Chow a day before another planned mass rally on the fifth anniversary of Beijing's rejection of a call for universal suffrage in the city, which sparked the Umbrella Movement in 2014.
Hours earlier, another vocal independence campaigner was detained at Hong Kong's airport.
The arrests are a sign of the "spread of 'white terror' towards Hong Kong protesters", said Issac Cheng of the Demosisto party, co-founded by Wong, using a term for China's efforts to fragment the protest movement.
The latest developments have raised concerns that the months-long and increasingly violent protests will continue for some time or could even see the government impose emergency laws.
"Developers are falling in response to this morning's arrests," Jackson Wong, asset management director at Amber Hill Capital, told Bloomberg News.
"Now people really fear emergency law could be implemented in Hong Kong. Property stocks are sold most, because if Hong Kong is not different from other Chinese cities, it's hard to retain talent. And property prices won't find support."
The Hang Seng ended up 0.08% at 25 724.73.
The benchmark Shanghai Composite Index lost 0.16% to 2 886.24 and the Shenzhen Composite Index, which tracks stocks on China's second exchange, slipped 0.74% to 1 579.25.
Among the worst affected, Swire Properties dived 3.56%, Sino Land sank 1.75%, Sun Hung Kai Properties tumbled 1.77% and New World Development lost 1.81%.
The HSI had opened more than 1% higher after China on Thursday appeared to want to dial down trade tensions, saying it would hold off on responding in kind to US tariffs, as it has previously warned it would do.
The news came as a big relief for world markets, which have been hit by volatility this week over the standoff.
