A protester throws a tear gas canister fired by police during a rally against a controversial extradition law proposal outside the government headquarters in Hong Kong on June 12, 2019. - Violent clashes broke out in Hong Kong on June 12 as police tried to stop protesters storming the city's parliament, while tens of thousands of people blocked key arteries in a show of strength against government plans to allow extraditions to China. (Photo by DALE DE LA REY / AFP)
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(CNN Business) —  

Stocks dropped in Hong Kong on Wednesday as tens of thousands of people marched through the city’s financial district to protest a controversial extradition bill.

The Hang Seng index ended the day 1.7% lower. Leading the sell-off were property companies like Wharf Real Estate Investment, which fell 5.4%, and New World Development, which declined 4.2%.

“We’re going to see a hit on the markets because the ramifications of the bill are so significant,” said Richard Harris, chief executive officer of Port Shelter Investment Management.

The bill, which would enable China to extradite people from Hong Kong, was due to be debated by lawmakers in a Legislative Council session on Wednesday.

Protesters march along a road demonstrating against a proposed extradition bill in Hong Kong, China June 12, 2019.
Athit Perawongmetha/Reuters
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But that meeting was postponed after protesters hit the streets around the legislature, which shares prime waterfront real estate with many large banks and financial services companies.

Critics say the bill will leave anyone in Hong Kong vulnerable to extradition by Chinese authorities for political reasons or business offenses, undermining the city’s legal system.

Hong Kong has long been home to foreign companies that want easy access to China and other growth markets in Asia.

The former British colony was returned to China in 1997, when Beijing agreed to guarantee its semiautonomous legal system for the next 50 years. Harris said growing uncertainty over its legal status is prompting companies to rethink their presence in the city.

“People loved Hong Kong because it was China, but it wasn’t China. If Hong Kong is going to become more like China, of course they’re going to be looking elsewhere,” including Singapore, he said.

Analysts also say Hong Kong’s market may have been due for a correction. The Hang Seng index is up 5.7% this year.

Francis Lun, chief economist of GE Oriental Financial Group, predicted that the market reaction to the protests will be similar to when the city was paralyzed by pro-democracy demonstrations in 2014.

Lun said that investors were “rattled a bit, but the stock market didn’t crash.”

“The economy will keep on humming along, and as far as the political scene is concerned, China has control of everything. What can you do? Everyone will protest, but it will remain the same,” Lun added.