HONG KONG (Nikkei Markets) -- Hong Kong shares suffered their worst single day drop in more than a month on Wednesday, as risk sentiment turned sour after Iran attacked U.S. forces in Iraq.
The Hang Seng Index fell 0.8% at 28,087.92, its biggest single day decline since Dec. 4. Financial heavyweights AIA Group and HSBC Holdings lost 1.8% and 1.2%, respectively.
Iran on Wednesday fired ballistic missiles at two air bases in Iraq that house American forces, according to the Pentagon, as Tehran responded to the killing of Iranian Maj. Gen. Qassem Soleimani at the Baghdad airport last week. Iran's Foreign Minister Javad Zarif said in a tweet that the nation just "took and concluded proportionate measures in self-defense," adding that Iran was not seeking "escalation or war," but will defend itself against aggression.
U.S. President Donald Trump, meanwhile, said on Twitter that an assessment of casualties and damages was taking place and that he will make a statement on Wednesday. "So far, so good!" he said.
Spot gold prices were up 0.8% after the move, while Brent crude futures climbed 1.1%. U.S. equity futures pointed to a lower opening on Wall Street on Wednesday. All three major U.S. equity indexes fell overnight.
"The event may not become more critical, but it gives markets an excuse to correct," said Linus Yip, chief strategist at First Shanghai Securities. "We still have a positive outlook on Hong Kong, with support coming from a recovery in the mainland Chinese economy."
Recent indicators out of China, including factory activity data, have suggested that Asia's largest economy may be rebounding. Expectations that the U.S. and China will sign the first phase of a trade agreement next week have also helped.
On Wednesday, the Shanghai Composite Index declined 1.2% Wednesday. The Nikkei Asia300 Index edged 0.6% lower.
Shares of Kwan Yong Holdings fell 7.7% to HK$0.60, as the Singapore-based building contractor made its trading debut in Hong Kong after raising 130 million Hong Kong dollars ($16.7 million) in gross proceeds from an initial public offering. The debut marks the city's first listing of 2020.
Electric vehicle maker BYD slipped 1.2% after reporting a 38% drop in December sales.
China Energy Engineering added 1.1% after saying it entered an agreement with China National Nuclear to form a strategic cooperative partnership for the planning, construction of power and nuclear power projects in China.
Universe Entertainment and Culture Group jumped 9.1% after saying it expects to have swung to a net profit for the six months ended Dec. 31.
-- Suzannah Benjamin