Police wearing face masks cordoned off the Metropark Hotel and a group of blue-gowned and masked health workers was seen entering the hotel in the bustling bar and nightclub district on Hong Kong island.

The first confirmed case of swine flu in Asia was recorded in Hong Kong Friday after a Mexican man who arrived via Shanghai tested positive, Chief Executive Donald Tsang announced.

More than 300 guests and staff at the hotel where the patient had briefly stayed were placed under quarantine for seven days as officials announced "draconian" measures in a bid to contain the A(H1N1) flu virus.

"We have our first confirmed swine flu case in Hong Kong. He is Mexican," Tsang told reporters.

The 25-year-old Mexican arrived in Hong Kong on Thursday from Mexico via Shanghai on China Eastern Airlines flight MU 505, Tsang said.

He was admitted to hospital on Thursday night suffering from a fever and tested positive on Friday for the flu virus. He was in a stable condition, Tsang said.

The Metropark Hotel in Wanchai district where he had been staying had been isolated, he said.

"I will raise the alert level from serious to emergency," the chief executive said.

Despite putting Hong Kong on its highest level of alert, Tsang said all social activities and exhibitions would go ahead as normal and schools would remain open in the city, which is still scarred by memories of the SARS epidemic in 2003 in which close to 300 died.

"I stress we don't need to panic," he said.

Health Secretary York Chow said guests and staff at the hotel would be quarantined for seven days.

"We have also exercised the authority... so that we will first isolate the hotel and also... ensure the relevant people are quarantined for seven days," Chow told reporters.

"Since this is the first case in Hong Kong we must be very careful as the chance of controlling and containing this infection is limited, we will try to be more draconian in our policy," he said.

However, he dismissed the idea of an entry bar for people flying from Mexico.

He said around 200 guests and 100 staff would be affected by the quarantine order at the hotel, issued under the control and prevention of disease ordinance.

"We will also prescribe Tamiflu for them, which is proven to be an effective prophylactic for this disease."

In a statement early Saturday, the government added that 12 guests who refused to remain at the hotel had been moved to the Lady MacLehose Holiday Village, a newly "designated isolation camp" in a country park for a seven-day quarantine.

Meanwhile authorities have placed the Mexican man's two travelling companions and his Hong Kong friend in quarantine at Princess Margaret Hospital.

They were also trying to find the two taxi drivers who were in contact with the man and the 142 passengers on the flight from Shanghai.

"We are also tracing the passengers who were on the same flight as this patient, particularly the three rows in front and three rows behind," Chow said.

"We're prepared to have them sent to hospital for inspection and also for quarantine," he said.

He appealed for other passengers and cabin crew to come forward for health checks.

"With this I hope that we can minimise the spread of this possible virus to our community," the health secretary said.

China's official Xinhua news agency reported early Saturday that the Ministry of Health was taking "prevention and control measures" following the confirmation of the spread of the virus to Hong Kong.

"The ministry said it is exerting efforts to track the passengers aboard the flights to ensure that they are quarantined," the report said, adding that it had passed flight information onto Hong Kong authorities.

Yuen Kwok-yung, who heads the team of researchers studying the flu at the University of Hong Kong, said there is currently no gold standard for the disease as each country is trying to develop its own tests.

Hong Kong, at the forefront of the SARS epidemic in 2003 and already on alert for bird flu, had previously announced a series of tough measures to combat any threat from swine flu.

The southern Chinese city has stepped up its protection measures, including the use of temperature screening machines at airports and other entry points.

Authorities have said they would detain anyone showing symptoms of the virus after arriving from an infected area.

Health officials have advised against all non-essential travel to worst-hit Mexico.