The inferno -- the Chinese financial hub's worst in decades and the world's deadliest residential building fire since 1980 -- sent shock waves through the densely populated city.

- Death toll -

Intense flames burned on bamboo scaffolding covering apartment blocks of Wang Fuk Court, a residential complex undergoing repairs in the northern district of Tai Po, on Wednesday.

The blaze rapidly engulfed seven of the eight towers at the residential estate, each of which has 31 floors for a combined total of 1,984 apartments.

One firefighter was killed battling the blaze, which was "largely extinguished" by Friday morning after burning for more than 40 hours, the fire services said.

The city's security chief, Chris Tang, said the death toll stood at 128 people.

"We do not rule out the possibility that police will find more charred remains when entering (the buildings) for detailed investigation and evidence collection," he said.

Around 200 people are listed as missing, with 89 bodies as yet unidentified.

The blaze was Hong Kong's deadliest since 1948, when an explosion followed by a fire killed at least 135 people.

- Survivors -

Rescuers have finished their search for survivors.

Hong Kong's government has announced a HK$300 million ($38.5 million) fund to help victims of the fire.

Volunteers have set up supply stations for clothes, food and household goods, as well as booths providing medical and psychological care.

City authorities said they had opened at least nine shelters and were organising temporary accommodation and emergency funds for residents who had lost their homes.

Dozens of injured people were still in hospital, including 11 in critical condition.

- Rapid spread -

Authorities are investigating what sparked the fire, including examining the bamboo scaffolding and the netting wrapped around it as part of the renovation work.

Hong Kong's anti-corruption body has launched an investigation into the project, arresting eight people on Friday.

Separately, police had already said they had arrested three men on suspicion of negligently leaving foam packaging at the fire site.

Security chief Tang said the fire likely "started on the protective nets outside of the lower floors... and quickly spread upward due to the burning foam boards, affecting multiple floors" and then to six additional buildings.

"Bamboo sticks that were broken by fire fell down and spread the blaze" across the compound, he said.

Social media footage verified by AFP shows flames surging rapidly within minutes, igniting a raging inferno.

- Fire alarms -

Preliminary tests showed the protective nets met fire safety requirements, "but the foam boards surrounding the windows were highly flammable", Tang said.

Critics have urged Hong Kong authorities to make the use of fire-proof materials compulsory on construction sites.

Fire services chief Andy Yeung said investigators had found that alarm systems in all eight blocks "were malfunctioning".

Residents recounted having to run door-to-door to alert neighbours to the danger.

- Tightly packed city -

Hong Kong is one of the most densely populated places in the world, making urban disasters a significant risk.

Its 7.5 million residents are squeezed into islands covered in steep hills.

The city's population density is more than 7,100 people per square kilometre of land, on par with packed metropolises such as Tokyo.

A construction boom in past decades was largely fuelled by residential towers built to house the city's growing population.

Much of the new residential development in recent decades has been in the New Territories, where Tai Po is located.

Authorities said they would inspect all housing estates undergoing major work following the disaster.