* Hang Seng plunges 5.6%, real estate stocks drop 7.7%
* Beijing moves to impose Hong Kong national security laws
* Analysts fear rekindling of streets protests, U.S. tensions (Adds bullets, attaches alert, updates prices)
By Noah Sin and Tom Westbrook
HONG KONG/SINGAPORE, May 22 (Reuters) - Hong Kong’s stock market fell more than 5% on Friday as China moved to impose national security laws on the city, raising fears of a revival of the civil unrest that convulsed the financial hub for much of last year.
The Hang Seng Index led losses in Asian markets and recorded its largest daily percentage drop since July 2015. The property sector sub-index fell 7.7%, marking its worst day since 2008.
The sell-off was triggered by China’s proposed legislation, which empowers its parliament to establish legal and enforcement mechanisms to ensure national security in Hong Kong and Macau, its other semi-autonomous city.
Concern the proposals could reignite the pro-democracy demonstrations of 2019 and heighten tensions between Beijing and Washington spooked investors and activists called for a march against Beijing’s plans.
“What it’s basically doing is circumventing Hong Kong’s Basic Law,” Rob Carnell, ING’s chief economist in Asia, said, referring to the mini-constitution that allows the city freedoms unavailable in mainland China.
“I think this is probably going to go quite explosive quite quickly.”
Carnell said the proposal questioned the notion that Hong Kong’s Basic Law, drawn up to guide Hong Kong’s relations with Beijing after its handover from British rule in 1997, would remain unchanged until 2047.
Volumes in nervous trade were high, topping 3.68 billion shares in Hong Kong, the highest since March 20.
The Hang Seng index dropped 17.8% from peak to trough between April and August last year in response to months of protest against a Chinese extradition bill and heightened Sino-U.S. trade tensions.
Friday’s drop eclipses any single-day fall during the height of unrest last summer, or during March’s panic selling as the coronavirus pandemic spread.
Adding to selling pressure across global stock markets, China on Friday dropped its annual growth target for the first time.
Tense U.S.-China relations also looked set to worsen after the U.S. State Dept warned Beijing over the new law on Thursday and as Republican and Democratic senators threatened sanctions on Chinese officials.
An index of Hong Kong-listed Chinese shares at one point dived 4.9% to their lowest level since April 2.
The Hong Kong dollar weakened to 7.7575 against the U.S. dollar, its weakest since April 9, while interbank interest rates edged up across the curve.
Shares in Shanghai also fell 1.9%, sapped by concerns over economic growth and Sino-U.S. tensions, recording their worst week in nine.
Additional reporting by Donny Kwok in Hong Kong and Andrew Galbraith in Shanghai; Editing by Vidya Ranganathan, Shri Navaratnam and Barbara Leiws