by AFP/ pic by BLOOMBERG

CHINA – Hong Kong stocks plunged Wednesday as investors braced for further unrest following days of violent protests that have almost ground parts of the city to a halt, with police warning it was close to “total collapse”.

After more than five months of standoffs, the demonstrations appear to have entered a much more violent phase.

And with the fighting showing no sign of easing, there are increasing worries about the outlook for a city known for its safety and ease of doing business, with police on Tuesday saying the rule of law was on “the brink of total collapse”.

There are even whispers that Alibaba plans for a $15 billion share sale in the city – which reports said Wednesday were approved by regulators – could be affected. The firm had already called off a summer listing owing to the protests and the China-US trade war.

The Hang Seng index sank 1.76 percent, or 477.47 points, to 26,587.81 by the break Wednesday.

While the China-US trade war is a major drag, the demonstrations have helped hammer the local economy which fell into recession in the third quarter for the first time in 10 years at the height of the global financial crisis.

The tourism industry has also been battered, with arrivals plunging by half, while a key measure of business confidence plunged to its lowest level since 2008.

“The situation in Hong Kong has taken a decidedly dark turn this week, with the violence and economic disruption seemingly gathering pace,” said OANDA senior market analyst Jeffrey Halley, adding that nervousness about Hong Kong was weighing on other Asian markets.

“The worries about direct intervention by Beijing and its implications for the region, has ratcheted materially higher.”

Property firms were among the worst affected with New World Development down more than five percent, Henderson Land falling three percent and Sino Land off 3.7 percent. Swire Properties shed three percent.

Casino operators in Macau were also feeling the pinch. Sands China, Galaxy Entertainment, and Wynn Macau were all down almost two percent.

“There’s not enough certainty,” Airy Lau, at Fair Capital Management, told Bloomberg News, which said he had pulled his investments from the city’s exchange by August.

“We’ll see stocks fall a little here, rise a little there. I don’t think investors expect a resolution to the protests any time soon.”