Hong Kong stocks plummeted on Wednesday, dragged down by fears of further devaluation of the Chinese yuan. The Hang Seng Index closed sharply lower, reflecting broad investor concern.

The devaluation fears were triggered after the People’s Bank of China (PBOC) unexpectedly lowered the yuan’s daily reference rate for the second consecutive day. This move sparked speculation that Beijing is prepared to allow the yuan to depreciate further to support its slowing economy.

Analysts suggest that a weaker yuan could hurt Hong Kong-listed companies with significant mainland operations, as it would increase the cost of their imports and reduce the value of their earnings in yuan terms.

The Hang Seng Index’s decline was broad-based, with most sectors experiencing losses. Financial stocks were particularly hard hit, reflecting concerns about the potential impact of a weaker yuan on the banking sector.

Market participants are closely monitoring the PBOC’s actions and statements for further clues about its intentions regarding the yuan. The currency’s future trajectory will likely have a significant impact on Hong Kong’s stock market in the coming days and weeks.