Dec 16 (Reuters) - * Hang Seng down 1.3 pct, takes out key support
* Further weakness could see index test August low
* Shanghai edges lower, consumer issues buck trend
* Insurers tumble, Carlyle's CPIC potential placement weighs (Updates to close)
By Vikram S.Subhedar and Farah Master
HONG KONG/SHANGHAI, Dec 16 (Reuters) - Hong Kong stocks extended this week's slide on Thursday, putting the Hang Seng at risk of wiping out its slim gains for the year after risk-averse investors pushed the benchmark index below a key support level.
The Hang Seng slid 1.3 percent to 22,668.78 points, falling below a closely watched support level that some market players say could pave the way for a further decline to the August low of around 20,400.
"The market is unexpectedly weak. Uncertainties about Europe and China (interest) rates is prompting some profit-taking but there's no one willing to come in and bid prices up," said Jackson Wong, an investment manager at local brokerage Tanrich Securities.
"Volumes are still light, but the breach of 22,800 is a little worrying," said Wong.
The Hang Seng broke through its November low and also a level that marks the neckline of a "head and shoulders" pattern developing on the charts that could lead to further weakness.
Insurance stocks were a big drag on the index with Ping An sinking 4.5 percent, making it the top loser among Hang Seng constituents. China Life fell 2.2 percent.
China's $124 billion life insurance industry is facing a major shake-up as the country's biggest banks take advantage of recently relaxed rules to aggressively enter the business. [ID:nL3E6MJ0FX]
"I would say there's a bit of profit-taking on insurers at this point," said Ivan Cheung, head of regional insurance research at Mirae Asset Securities.
Ping An shares had risen more than 24 percent in the year to Wednesday's close, though China Life had shed some 17 percent.
Another factor could be that U.S. private equity group Carlyle's lock-up period in China Pacific , a smaller insurer which went public last December, ends next week.
Hong Kong's market has underperformed Asian markets this month with the benchmark down 1.5 percent compared with a 3.5 percent gain for MSCI Asia ex-Japan index. For the year, the Hang Seng is up 3.6 percent.
SHANGHAI LOWER
China's key stock index closed down 0.5 percent, with a lack of participation from investors, particularly in heavyweight banking shares because of lingering concerns over tightening measures, keeping volumes thin.
Beijing surprised investors over the weekend by raising bank reserve requirements instead of policy interest rates in a bid to control lending and cool inflation. [ID:nTOE6BA009]
China should step up efforts to mop up excess liquidity and will continue to use banks' reserve requirements, already at a record high, to do so, central bank governor Zhou Xiaochuan said on Wednesday. [ID:nTOE6BE065]
"Investors are worried going into the end of the year. Rate rise rumours are still unsettling the market after the inflation data last week," said Zhang Gang, analyst at Central Securities in Shanghai.
Analysts expect the Shanghai Composite's 250-day average, currently around 2,860 points, to provide good near-term support with 3,000 points seen as the next level to break for furthe upside.
Financials were the biggest drag with insurers pulling the Shanghai markets lower as well. Ping An Insurance , dropped 2.9 percent, while China Life Insurance dropped 1 percent.
Food and beverage issues were among the biggest percentage gainers ahead of the holiday season.
Newly listed food distributor Yonghui Stores jumping 6.2 percent. The fresh meat retailer had surged nearly 35 percent on its trading debut on Wednesday.
"Consumer goods are less affected by tightening measures, these stocks have the ability to move much higher," said Chen Shaodan, analyst at China Development Bank Securities. (Editing by Kim Coghill) ($1=6.654 Yuan)
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