Hong Kong stocks reversed early gains to close at 12,833.51 on Friday, down 297.41 points, or 2.26 percent.

Turnover was down to HK$43.89 billion ($5.63 billion) from Thursday's HK$48.59 billion ($6.23 billion).

Hong stocks reversed opening gains to end 2.26 percent lower on mounting selling pressure on China Mobile after it was rumored that an investor attempted to sell off millions of shares in the heavyweight.

China Mobile was obviously the target of negative comments as institutions slashed the target prices for, or downgraded, shares of the mainland mobile operator. It slumped HK$3.6, or 5.4 percent, to close at HK$63.1.

The blue chip index moved between 12,797.10 and 13,157.9 before closing at 12,833.51. Market turnover totaled HK$43.89 billion ($5.63 billion), down from Thursday's HK$48.59 billion ($6.23 billion).

The HSI futures were trading at a discount of 45 points, suggesting potential downside pressure after the recent rebound that spanned a week, whereas the China Enterprises Index futures were trading at a premium of 35 points.

Full-day shorting totaled 2.62 billion HK dollars ($336 million), or about 6 percent of the market turnover. China Mobile led the shorting list by contributing 7.3 percent of the shorting, followed by Li&Fung and HSBC.

The mainland-based banks were also losers as investors turned cautious of the industry prospects on concerns of further weakening economic fundamentals.

Bank of Communications, one of the state-owned commercial banking giants, closed down HK$0.28, or 5.42 percent, at HK$4. 89, and Bank of China lost 4.22 percent at HK$2.27, while ICBC tumbled 5.43 percent.

China Construction Bank also went down 5.24 percent to HK$4.16.

HSBC edged down HK$0.05 to end at HK$41.45 after shareholders approved its multi-billion US dollar rights issue overnight in London. The rights will be on the Hong Kong stock market for trading starting from Monday.

The finance sub-index lost 510.96 points, or 2.74 percent, making it the biggest loser among the four major stock categories.

Local banking players Hang Seng Bank and Bank of East Asia were down 3.06 percent and 1 percent, respectively, while mainland insurance players China Life and Ping An respectively shed 2.2 percent and 3.93 percent.

Cheung Kong, the conglomerate headed by Hong Kong's richest man Li Ka-shing, also tumbled 3.51 percent at HK$63.15, while SHK Properties, the leading residential developer in Hong Kong, was down 2.11 percent at HK$64.9.