Hong Kong's stocks fell yesterday, pushing the Hang Seng Index to a two-month low, on concern a US housing slump and related mortgage defaults pose a threat to global economic growth.

"It's a drag on market sentiments," said Mona Chung, who helps manage more than $2 billion at Daiwa Asset Management Ltd in Hong Kong. "We've turned a bit more defensive. "

Li & Fung Ltd led exporters lower after Wal-Mart Stores Inc cut its profit forecast, heightening concern that US demand is cooling.