SHANGHAI: Hong Kong equities dropped about 2% on Thursday to the lowest this year, and China shares sank, as investors dumped property and consumer stocks amid fears China Evergrande Group's financial woes could ripple through the broader economy.

       Hong Kong's Hang Seng index dropped 2% to 24,538.82 points by lunch break, the lowest level since early November. The Hong Kong China Enterprises Index lost 2.1%.

       In China, the blue-chip CSI300 index fell 0.7%, to 4,831.06 points, while the Shanghai Composite Index declined 0.7% to 3,631.45 points.

       Evergrande shares tumbled 8.5% to the lowest in a decade, as a liquidity crisis at the debt-laden developer worsens.

       Its main unit, Hengda Real Estate Group Co Ltd, applied to suspend trading of its onshore corporate bonds following a downgrade, a move that some analysts think foreshadows a default.

       Investors rushed to sell shares of other property developers, as Goldman Sachs said in a note on Wednesday that Evergrande's crisis could pose spillover risks to the broader Chinese property sector.

       Hong Kong's property subindex slumped nearly 4%, while China's CSI Real Estate Index dropped 2.4%.

       Beijing has unleashed a series of crackdowns on industries ranging from technology to private tutoring. Investors see the property sector also in China's regulatory crosshairs.

       "The investment lens through which global investors evaluate opportunities in China has changed and the strategies deployed towards investing in the Middle Kingdom need to adapt accordingly," wrote Norman Vilamin, CIO of Wealth Management at Union Bancaire Privee (UBP).

       Rating agency Fitch has also warned that an Evergrande default could expose numerous sectors to heightened credit risk.

       Hong Kong's consumer discretionary sector tumbled nearly 3% while healthcare stocks dropped more than 2%. - Reuters