Hong Kong stocks went into a tailspin on Tuesday as fears over the spread of the Wuhan pneumonia outbreak, as well as Moody's credit-rating downgrade on Hong Kong, spooked investors.

The market had opened the morning trading session with the Hang Seng Index more than 300 points down. The sell-off intensified throughout the day as the benchmark gauge tumbled 2.81 percent, or 810 points, to close at 27,985 points – the biggest single-day drop in eight months.

Market turnover reached a whopping HK$132.8 billion.

The Wuhan coronavirus outbreak, which revived memories of the deadly SARS epidemic that ravaged Hong Kong 17 years ago, sent investors running for cover, fearing its human-to-human transmission capability, which has now been confirmed, will deal a heavy blow to consumption and tourism-related stocks, said Linus Yip Sheung-chi, chief strategist at First Shanghai Securities.

He said due to mounting fears over the virus, people would be reluctant to leave their homes to buy goods, let alone travel, and this would dampen the consumption front, such as the retail, dining and air travel sectors.

Adding to the nervousness was Moody's decision on Monday to downgrade the SAR's credit rating by a notch from "Aa2" to Aa3", citing the city's protracted social unrest that could continue to weigh on the local economy.

Profit-taking also contributed to Tuesday's market nosedive, given the fact that the HSI had surged from 26,000 points to 29,100 in the past few months, and investors were keen to take the cash with the Lunar New Year around the corner, said Yip.

He recommended that investors go for internet and technology stocks, such as Tencent, Alibaba and Meituan Dianping, due to their sound fundamentals and the companies' operations unlikely to be affected by pneumonia epidemic.