Hong Kong  - Hong Kong leader Donald Tsang warned Monday of the danger of the swine flu virus spreading to the densely-populated city of 7 million as the outbreak hit share prices.

Chief executive Donald Tsang told reporters: "Hong Kong is a cosmopolitan city. We do not easily close our borders, and it is quite possible people carrying this virus during the hibernation period may come into Hong Kong."

He said the former British colony, which has seen deadly outbreaks of bird flu and severe acute respiratory syndrome, or SARS, in the past, had raised its alert level and was preparing for a possible outbreak.

No cases have yet been reported in Hong Kong or mainland China but the region has in the past been the first to see disease outbreaks that have gone on to infect people worldwide.

Nearly 300 people died and around 1,800 were infected when SARS spread from China to Hong Kong in 2003. Six people died and 12 others were infected in a bird flu outbreak in Hong Kong in 1997.

Shares slumped 2.7 per cent in morning trading in Hong Kong Monday in reaction to the swine flu outbreak. Shares in airlines fell sharply while stocks in pharmaceutical companies headed in the other direction.