The Hong Kong government will closely monitor Falun Gong activities in Hong Kong
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Tung Chee-hwa
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Chief Executive Tung Chee-hwa said the authorities would closely monitor the movement's activities to see if they posed any risk to social order.
Mr Tung said reports appeared to show Falun Gong had harmed a lot of people and suggested it appeared to have "some characteristics of an evil cult".
But the chief executive, who has been under pressure from Beijing to curb the group's activities in the territory, made it clear the government would not act hastily.
Thousands of members have been arrested on the mainland
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China outlawed Falun Gong in July 1999, branding it an "evil cult", and has since rounded up thousands of practitioners.
However, the movement is legal in Hong Kong, where it has stepped up its protests against Beijing's crackdown.
The Hong Kong Government angered Beijing last month by allowing Falun Gong to hold a major conference in the territory.
'Suicides'
Mr Tung, who made his comments to the legislative council, was breaking a long silence on the meditation group.
I'm afraid Mr Tung's comments on Falun Gong will incite hatred against us
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Hui Yee-han, Falun Gong spokeswoman
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He also said he was "shocked" by reports that Falun Gong members had set themselves on fire in Beijing last month.
"I certainly hope that such incidents will not happen in Hong Kong and I believe the people of Hong Kong share this view," he added.
But his comments infuriated Falun Gong members, who say Beijing is using the story as part of a propaganda campaign to vilify the group.
They say practitioners would never commit suicide because it is against their beliefs.
Test
Analysts say this is one of the biggest tests yet of the "one country, two systems" form of government introduced when Hong Kong returned to Chinese sovereignty in 1997.
The territory has separate laws and its own government, which is in theory independent from Beijing.
Falun Gong said Mr Tung's remarks were ominous.
"How can he say we're an evil cult?" asked spokeswoman Hui Yee-han. "I'm afraid Mr Tung's comments on Falun Gong will incite hatred against us."
Opposition leader Martin Lee of the Democratic Party said Mr Tung was "exactly toeing the Beijing line" on Falun Gong.
The movement, which promotes slow meditative exercises, says it has millions of followers in China.
Members say they are only campaigning for the right to practise freely on the mainland and insist they have no political motives.