HONG KONG: Hong Kong stocks finished 1.13 per cent lower on Wednesday, hit by reports that property tax trials will be launched in China this year in a bid to cap soaring prices.

The benchmark Hang Seng Index ended down 238.99 points at 20,986.89 on turnover of HK$61.88 billion (US$7.98 billion).

Investors also remain nervous ahead of an expected US Federal Reserve decision on its vast stimulus scheme amid fears it will start to row back on the $85-billion-a-month buying programme, which has sent markets soaring since being unveiled in September.

The China Securities Journal cited an unnamed source as saying more Chinese cities, including Beijing, Shenzhen and Nanjing, could launch tax trials in the second half of the year.

The move would be the latest by the government to cool the property market, in which surging prices have left millions unable to buy their own homes, stoking discontent.

Hong Kong shares followed losses in China's market. The China Enterprises Index – which tracks Chinese companies listed in Hong Kong – fell 1.5 per cent.

Henderson Land Development fell 1.50 per cent to HK$46.05 and New World Development was 2.63 per cent off at HK$11.10.

HSBC fell 0.36 per cent to HK$83.75, conglomerate Cheung Kong fell 2.40 per cent to HK$105.90 and energy giant CNOOC lost 0.15 per cent to end at HK$13.60.

Chinese stocks closed down 0.73 per cent. The benchmark Shanghai Composite Index fell 15.84 points to 2,143.45 on turnover of 67.1 billion yuan ($10.9 billion).

Adding to selling pressure on the mainland was a report in state media that quoted unnamed sources as saying the government could resume approvals of initial public offerings (IPOs) as early as July, sparking fears of an oversupply of shares in the market.

“Investors became worried after the two reports on IPOs and property taxes,” Zheshang Securities analyst Zhang Yanbing told Dow Jones Newswires.

Financial stocks and property shares were hardest hit.

China Everbright Securities dropped 4.28 per cent to 12.09 yuan and Industrial Bank lost 2.52 per cent to 16.22 yuan while Ping An Insurance fell 1.20 per cent to 37.72 yuan.

Property developer China Enterprise dropped 2.19 per cent to 5.37 yuan and Poly Real Estate fell 1.62 per cent to 10.94 yuan.

Xi'An Aero-Engine extended gains after it said it plans to buy engine assets from industry giant AVIC, surging by its 10 per cent daily limit to 17.13 yuan.