Hong Kong chief executive Tung Chee-hwa on Wednesday flew to Beijing to meet other Chinese leaders, leaving the territory's government gripped by uncertainty over the timing of his resignation and the identity of his successor.

Mr Tung's office refused to comment on his plans to step down, revealed in the Financial Times on Tuesday, despite similar reports in local media on Wednesday. Mr Tung said in Beijing that he would issue astatement “at an appropriate time”.

The prospect of his resignation triggered a negative reaction in the currency markets. Dealers said the Hong Kong dollar remained under pressure from fund outflows partly caused by fears of political uncertainty.

Interbank rates also rose amid fears that investors may take funds out of the territory. The Hang Seng equity index fell 1.5 per cent the biggest drop in two months although traders said this was due to continued weakness in HSBC, one of Hong Kong's largest stocks.

Mr Tung's succession could be contested by the former British colony's increasingly active pro-democracy camp, which fears that an election may be conducted quickly to ensure a candidate favourable to Beijing wins.

The chief executive is elected by a 800-member committee partial to Beijing, but candidates must be nominated by at least 100 members of the committee - a level of support pro-democracy politicians doubt they could achieve.

Lee Wing-tat, spokesman for the Democratic party, said it would be “very, very difficult” for the party to get enough nominations.

The pro-democracy camp would discuss whether to put forward a candidate in the next two days, he said.

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