HONG KONG, Aug 10 (Reuters) - Hong Kong media tycoon Jimmy Lai became the highest-profile arrest under a new national security law on Monday, detained over suspected collusion with foreign forces as around 200 police searched the offices of his Apple Daily newspaper.

Lai, 71, has been one of the most prominent democracy activists in the Chinese-ruled city and an ardent critic of Beijing, which imposed the sweeping new law on Hong Kong on June 30, drawing condemnation from Western countries.

His arrest comes amid Beijings crackdown against pro-democracy opposition in the city and further stokes concerns about media and other freedoms promised to the former British colony when it returned to China in 1997.

It bears out the worst fears that Hong Kongs National Security Law would be used to suppress critical pro-democracy opinion and restrict press freedom, said Steven Butler, the Committee to Protect Journalists Asia programme coordinator. Jimmy Lai should be released at once and any charges dropped.

Ryan Law, chief editor of Apple Daily, a staunch anti-government and pro-democracy tabloid that also does investigative work, told Reuters the paper would not intimidated by the raid.

Business as usual, he said.

The new security law punishes anything China considers subversion, secession, terrorism and collusion with foreign forces with up to life in prison. Critics say it crushes freedoms, while supporters say it will bring stability after prolonged pro-democracy protests last year.

Lai had been a frequent visitor to Washington, where he has met officials, including Secretary of State Mike Pompeo, to rally support for Hong Kong democracy, prompting Beijing to label him a traitor.

Hong Kong police said they had arrested seven men, aged 39-72, on suspicion of breaching the new security law, without naming them, adding that further arrests were possible.

Apple Daily, which posted on its Facebook page a livestream of police officers roaming through its newsroom and rifling through files, reported Lai was taken away from his home early on Monday.

The live feed showed staff being asked to show identity documents. Some executive offices were sealed off with red cordons. The police later wheeled in stacks of empty plastic containers.

Lai himself was brought back to the office later, initially in handcuffs.

We cant worry that much, we can only go with the flow, Lai said, before being escorted into a police vehicle.

Police said around 200 officers entered the premises with a court warrant. The law allows police to search premises without one under exceptional circumstances, and also allows seizing documents, equipment and financial assets.

The search was finished by midafternoon, and police said they collected 25 boxes of evidence.

Apple Daily reported one of Lais sons, Ian, was also arrested at his home and later showed his restaurant, Cafe Seasons, being raided by police.

Shares of media company Next Digital, which publishes Apple Daily, plunged 16.7% before rebounding to trade 300% higher. Some on Facebook posted screenshots of purchases saying they bought to show support for Lai.

Reuters was unable to verify the veracity of the posts.

The market may now think the worst is over, said Kenny Ng, analyst at brokerage Everbright Sun Hung Kai.