* Shanghai shares drop to 7-week low on supply concerns
* HK shares fall to lowest in more than 2 weeks
* Oil, coal, metal stocks hit by lower commodity prices
By Parvathy Ullatil & Claire Zhang
HONG KONG/SHANGHAI, Aug 17 (Reuters) - Shanghai stocks extended last week's selloff to drop to a seven-week low on Monday on worries this year's rally had got ahead of the economic recovery, with concern about new equity supplies also weighing on sentiment.
Major brokerage Everbright Securities will list its shares in Shanghai on Tuesday after raising 10.96 billion yuan ($1.60 billion) in its initial public offering.
Hong Kong shares fell to their lowest in more than two weeks, tracking losses on the mainland bourses and the rest of the region after U.S. consumer confidence data darkened the global economic outlook.
"Market volatility continues today and will continue in the near term because of uncertainties surrounding China's economic recovery and government policy towards the stock market," said Zhou Lin, stock analyst at Huatai Securities in Nanjing.
Oil and coal shares were weak as oil prices fell below $67 a barrel, extending their biggest drop in two weeks on Friday. PetroChina, the most-heavily weighted stock in the index, lost 4 percent to 13.38 yuan while China Shenhua Energy skidded 5.5 percent to HK$30.85.
Metal shares slid as Shanghai metals futures prices sank, with Jiangxi Copper sagging 8.4 percent to 38.05 yuan. Yunnan Copper, China's third-largest copper producer, was down 7.2 percent at 30.77 yuan after posting a first-half loss.
In Hong Kong, Chinese bank stocks were the top traded counters in the morning session as investors, fearful of likely monetary tightening in China, booked profits.
China Construction Bank was down 1.6 percent while Bank of China slid 3.4 percent.
By 0335 GMT the benchmark Hang Seng Index was 2.7 percent lower at 20,324.39 after dropping to an early low of 20,218.36.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was down 2.9 percent at 11,553.49.
The Shanghai Composite Index was down 2.8 percent at 2963.088 points, after sliding to its lowest in nearly seven weeks earlier. The index slid 6.6 percent last week as mixed economic data made investors wary.
Losing Shanghai A shares outnumbered gainers by 833 to 96, while turnover for Shanghai A shares dropped to 64.7 billion yuan ($9.5 billion) from Friday morning's 73.4 billion yuan.
"The Shanghai Composite Index has little potential to recover its 2009 high of nearly 3,500 any time soon, as investor sentiment was severely hit by the market's recent fall," said Huatai's Zhou.
Qiang Xiangjing, analyst at CITIC-Kington Securities, added: "The additional share supply is draining money from the market." He expected the index to consolidate around current levels after some of the profit-taking pressure had eased, with support likely around the 20-week moving average, currently above the 2,800 mark. (Editing by Edmund Klamann and Jonathan Hopfner)