China shares slump as investors dump over-valued sectors; SMIC tumbles

* SSEC -1.87%, CSI300 -2.11%, steepest drops since July

* Consumer, health care firms lead losses following large gains this year

* Tech firms slump on report of possible SMIC blacklisting by U.S.

SHANGHAI, Sept 7 (Reuters) - China's benchmark Shanghai Composite Index ended at its lowest close since late July as investors sold off sectors seen as over-valued, and as the reported possible blacklisting of China's largest chip maker by the United States hit tech firms. ** At the close, the Shanghai Composite index was down 1.87% at 3,292.59, the lowest closing level for the index since July 30. It was the fourth straight day of losses for the Shanghai index, and its steepest one-day drop since July 24. ** The blue-chip CSI300 index tumbled 2.11%, also its biggest daily drop since July 24. ** Losses accelerated in the afternoon session, led by the consumer staples sector, which slumped 2.88%, health care shares, down 3.36%, and financials , down 1.14%. ** Health care shares are still up 43.18% for the year, and consumer firms have gained 49.28%. The Shanghai stock index is up 7.9% and the CSI300 has risen 14% for the year. ** "Optimistic expectations for the economy are clearly overdrawn, and it has become market consensus that some sectors are very expensive," Jianghai Securities analysts said in a note. ** "We believe that high valuations mean the market will correct to a reasonable level and that a market decline is inevitable. It's just a matter of the trigger," they added. ** Shares of China's largest chipmaker, SMIC, plummeted 11.29% in Shanghai. ** The Trump administration is considering whether to add SMIC to a trade blacklist, a Defense Department official told Reuters, as the United States escalates its crackdown on Chinese companies. ** The CSI IT sub-index fell 2.94%. ** The smaller Shenzhen index ended down 2.22% and the start-up board ChiNext Composite index was 3.329 weaker%. ** At 07:07 GMT, the yuan was quoted at 6.832 per U.S. dollar, 0.17% firmer than the previous close of 6.8435. (Reporting by Andrew Galbraith; Editing by Hugh Lawson)