The Hang Seng index of 33 blue-chip companies is already trading near its four-year lows.
The Hang Seng Index finished 2% down to 18185.59, wiping out all of its 2012 gains.
The Hang Seng Index in Hong Kong gained 0.2%, while the Shanghai Composite rose 0.6%.
On Monday, the Hang Seng index continued its rise by climbing another 1% to 22915.09.
The Shanghai Composite was down 0.6%, while the Hang Seng Index in Hong Kong was flat.
Banks also rose in Hong Kong, where the Hang Seng Index was 1.8% higher at 19455.33.
That could hamper further gains for the Hang Seng index in the medium to long term.
Company earnings continued to be a focus in Hong Kong with the Hang Seng Index up 0.1%.
In Hong Kong however, stocks were still recording fresh declines, with the Hang Seng Index down 0.3%.
The Hang Seng Index was up 2% to 23020.27, its second best daily performance in 2013 so far.
Over the same period, the Hang Seng Index has risen 14%, reflecting foreign-investor optimism about China's long-term prospects.
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The Hang Seng index in Hong Kong opened over 2% lower to 19, 285.
Company earnings continued to be a focus in Hong Kong with the Hang Seng Index up 0.2% at 22, 580.77.
The selling in the mainland also influenced Hong Kong, where the Hang Seng Index was down 1.3% at 22519.69.
" Though he thinks some red chips are overvalued, Bhaskaran says, "The Hang Seng Index is ready to soar.
On October 2nd the Hang Seng index closed above 28, 000 for the first time, rising 3.9% in one day.
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In Hong Kong, where many foreign investors make their bets on Chinese themes, the Hang Seng Index has surged 18.5%.
In Hong Kong, where the Hang Seng Index fell 0.5% to 23366.37, the focus was on one of China's largest banks.
The Shanghai Composite finished down 0.1% at 2193.80, while the Hang Seng Index in Hong Kong ended off 0.5% at 21, 569.67.
In Hong Kong, the Hang Seng Index was down 1.1% to 18, 178.05, while the Shanghai Composite Index rose 1.7% to 3, 060.25.
Asia's worst performer for the month was the Hang Seng Index, which dropped 11.7% to 18629.52 and 0.3% down on the day.
The Hang Seng Index rose 310.44 points to end at 19, 585 points.
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Stocks in China were lower, though the reaction was more extreme in Hong Kong, where the Hang Seng Index lost 2% to 22083.36.
In Hong Kong, the Hang Seng Index has gained 17.6 per cent this year, making it the best-performing major market in the world.
The German DAX was up 2.7% with the Hang Seng Index up 1.7% as overall the overseas markets continue to act much better.
The government is committed eventually to selling its shareholdings, which represent about 7.3% of the 33 companies that make up the Hang Seng index.
The Shanghai Composite Index ended down 0.2% at 2, 174.12, while the Hang Seng Index finished 0.3% lower at 22, 668.30 after returning from a holiday on Wednesday.
The Nikkei was 19.1% down from its March peak, and by the end of Monday the Hang Seng Index was 16.3% down from its February high.
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