Hong Kong and China shares declined on Monday, with financials and growth-sensitive sectors weak after Beijing announced its lowest annual growth target in eight years, sparking concerns that Chinese demand will slow.

In Hong Kong, investors were also spooked by fears that more companies could take advantage of this year's rally to raise funds, putting further pressure on stock prices.

The Hang Seng Index ended down 1.4 percent while the China Enterprises Index of the top Chinese listings in Hong Kong slipped 2.3 percent.

The Shanghai Composite Index was down 0.6 percent in the highest turnover in four sessions.

American International Group (AIG) announced a $6 billion stake sale in its Asia subsidiary, AIA Group Ltd at a 6-7 percent discount, sparking fears that any other placements could be priced at a bigger discount than AIA, Asia's third-largest insurer and seen as a better quality name.

It is precisely because of the possibility of deleveraging by foreign financial institutions that we prefer not to set an aggressive target level for the Hang Seng Index this year, said Alan Lam, Julius Baer's Greater China equity analyst.

Major shareholders could be looking to offload holdings from last year's IPOs when their lockup periods expire, but prospective large-scale IPO activities from China may absorb market liquidity in a big extent, he added.

While trading was suspended in AIA shares on Monday, its Chinese peers were particularly hard hit. China Life Insurance and Ping An Insurance lost 4.4 percent and 3 percent, respectively.

LOWER CHINA GROWTH TARGET TRIGGERS PROFIT-TAKING

Adding to weakness in Chinese financial stocks were banks, the biggest drags on benchmark indices. China's biggest lender, Industrial and Commercial Bank of China (ICBC) lost 1.1 percent in Shanghai and 2.7 percent in Hong Kong.

Speaking at the annual session of China's National People's Congress (NPC), Premier Wen Jiabao cut the country's 2012 growth target to 7.5 percent from the longstanding 8 percent annual goal as Beijing looks to wean the economy off reliance on external demand and foreign capital.

Investors are taking profits after no big surprises for the NPC's work report. The slower GDP growth target may imply less or later than expected policy easing in China, Julius Baer's Lam said.

Hong Kong shares also weakened after the Hong Kong dollar dropped to its weakest levels since end-January, pointing to some possible outflows out of the territory.

Growth-sensitive Chinese resources stocks saw the bigger percentage losses in Hong Kong. Jiangxi Copper and Angang Steel each lost about 4 percent, while Yanzhou Coal slipped 3.3 percent.

Sun-Art Retail Group Ltd, among the largest hypermart operators in China, slumped 6.7 percent in more than three times its 30-day average volume after posting a sharp slowdown in same-store sales for the second half of 2011.