LONDON (Reuters) - HSBC Holdings is likely to halve its dividend and may need to raise up to $30 billion in a rights issue, according to leading analysts, sending shares in Europe's biggest bank to a seven-year low.

Morgan Stanley slashed its earnings forecasts for HSBC for this year and next, and said its relative capital position is not as strong as in the past.

"Our detailed study of HSBC's capital and asset quality position reinforces our belief that it will have to halve the dividend and raise major capital in 2009," Morgan Stanley analysts Anil Agarwal and Michael Helsby said in a note. HSBC's London-listed shares closed down eight percent at 589 pence, after hitting 581.5p, their lowest level since September 2001. Its Hong Kong shares closed down 4.1 percent at HK$70.

The DJ Stoxx Europe bank sector was down five percent as the capital worries, a profit warning from Deutsche Bank and big job cuts highlighted the problems facing the industry.

HSBC has easily outperformed rivals in the past year as unlike most big banks it has not had to raise capital, due to its historically strong capital and liquidity. But it is facing increasing scrutiny over any potential need to raise funds as the economy worsens.

"Historically, HSBC has carried about 120 basis points of surplus capital at the group level - this has now all but gone at a time when we think it better for the buffer to have increased," Agarwal said in the note.

"We believe HSBC is highly likely to cut the dividend in 2009, and in our bear case we now pencil in a £20 billion ($29.2 billion) rights issue."

HSBC paid out about $10.1 billion in dividends in 2007. HSBC's tier one capital was 8.9 percent at the end of September, above the European average. Its core tier one ratio stood at 7.5 percent at the end of June.

HSBC declined to comment on the research note, but in the past it has said it is comfortable with its capital position and its high cash generation, strong liquidity and funding keeps its capital well topped up.

Some analysts expect it to only raise capital if it takes advantage of problems elsewhere and makes an acquisition.

HSBC owns the Bank of Bermuda.