Reports of the Shenzhen government blocking the sale of 2,800 apartments in a residential complex triggered a rush to dump the Hong Kong-listed H shares of the State-owned developer, China Overseas Land & Investment Ltd on Friday.

The organization's shares lost 7 percent at one stage in early trading before recovering to close at HK$24.55, ($3.17) down 2.8 percent.

Other Hong Kong-listed mainland-based property developers were dragged down too, with Guangdong-based R&F Properties losing 3.1 percent, while CR Land retreated almost 4 percent.

The benchmark Hang Seng index dropped 1.02 percent to close at 24,103.52.

Shenzhen housing office posted the sales suspension order on its official website in the morning without providing an explanation for the move.

China Overseas itself issued a statement to the Hong Kong stock exchange in the afternoon refuting rumors it was being punished for legal violations.

The statement insisted the sale suspension order was part of "normal" government procedure and would have no effect on the company's financial performance.

China Overseas is the third H-share listed, mainland-based property developer, however, to see its share price plunge after its properties were "blocked" by the Shenzhen authorities.

Kaisa Group Holdings, a private-sector developer which earlier missed a coupon payment on a $500-million bond issue, has had four projects blocked from presales by the city government because of anti-corruption investigations, while shares in Fantasia Holdings Group Co plunged as much as 16 percent on Thursday in Hong Kong after some of its projects were blocked by the city authorities.

Analysts said that investors in Hong Kong were linking China Overseas and the others to the anti-corruption campaign that is sweeping across the property sector on the Chinese mainland.

"As everyone knows, real estate developers have close connections with local government officials and are deeply involved in the development of the local economies," one analyst told China Daily.

Kenny Tang, general manager of the securities business division of AMTD Financial Planning Ltd, said he thought China Overseas Land would have been treated differently because it is State-owned and even if some of its senior executives had done something wrong, the company should not have been affected as much as it was.

He cited the example, too, of China Resources Power, whose shares were unaffected by an investigation into its chief executive Song Lin for allegedly taking bribes.

Hugo Hou, a Hong Kong-based analyst at Haitong International Securities, said: "The projects developed by China Overseas Land and Fantasia now blocked by the government are actually sold out assets, and no longer even belong to the two companies."

He said the real estate sector especially, however, remains increasingly sensitive to any suggestion of corruption.

Shenzhen's land and resources commission said on its official micro blog on Friday that the authorities would block any transaction if developers were found to have violated laws or rules. Transactions may also be temporarily suspended for "normal processing," it said.

Neither the authority nor the companies could offer any reason for the three recent moves.

Xu Hao, a fund manager with Shanghai based Guotai AMC, considered what had happened as individual cases that could not be "interpreted into a real estate industry collapse or bankruptcy. Investors should take them rationally".

He said: "Monetary policy and home sales are influential on property shares. Compared with the distiller shares, for example, real estate shares are less directly linked to the anti-corruption campaign."