Hk shares drop 3.1 pct to lowest in a year

* HSI below 20,000 points for first time in more than a yr

* Property stocks slump on Goldman Sachs downgrade

* Utilities eke out small gains on safe haven appeal

(Updates to mid-day)

By Parvathy Ullatil

HONG KONG, Sept 5 (Reuters) - Hong Kong shares shed 3.1 percent on Friday, with the main index sinking below 20,000 points to give up all the gains made in a stellar 2007 rally, tracking a slide on Wall Street after negative U.S. jobless data.

Local property stocks slumped after Goldman Sachs cut its ratings on the sector to cautious from neutral on Friday after factoring in a potential narrowing in primary market price premiums over secondary market prices.

Hong Kong's largest real estate developer Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz) tumbled 6.1 percent after Goldman Sachs downgraded the stock to neutral from buy.

The brokerage cut its rating on Henderson Land (0012.HK: Quote, Profile, Research, Stock Buzz) to sell from neutral, sending the stock down 5.3 percent.

The benchmark Hang Seng Index .HSI ended the morning session down 636.83 points at 19,752.65, its lowest intra-day level since August 17, 2007.

The Hang Seng Index gained 39 percent in 2007 to go from 19,964.72 in end 2006 to 27,812.65, peaking at nearly 32,000 points in October last year.

An unexpected increase in U.S. jobless claims, reported overnight, sent Wall Street shares tumbling and put investors on their guard ahead of key August non-farm payroll report due tonight.

"A lot of this negative sentiment is coming from U.S. and Europe where they are already dealing with a slowdown. It is true that Asia is still growing but we have to be realistic and say that this is bad time for the global economy," said Andrew Sullivan, sales trader with Mainfirst Securities.

"Investors are reappraising their outloook for global economic growth, rethinking what has happened so far to understand what will happen going ahead," he added.

Mainboard turnover fell slightly to HK$30.8 billion ($3.95 billion) from HK$31 billion at mid-day on Thursday.

Index heavyweight and Europe's largest lender HSBC Holdings (0005.HK: Quote, Profile, Research, Stock Buzz) slipped 2.4 percent following the negative sentiment towards its U.S. peers.  Continued...