* HSI off 0.1 pct as China Life drags for second day
* Drop limited as ICBC, China Unicom underpin after results
* Hong Kong short-selling highest in nearly two months
* Hang Seng down 1.9 pct on week, Shanghai loses 1.8 pct (Updates to midday)
By Vikram Subhedar and Lu Jianxin
HONG KONG/SHANGHAI, Aug 27 (Reuters) - Shanghai and Hong Kong stocks weakened on Friday, with the Hang Seng Index holding near a one-month low as shares in China Life Insurance extended their slide after a disappointing earnings outlook prompted a selloff.
The Hang Seng Index ended morning trading down 0.1 percent at 20,590.42. It was headed for third straight weekly loss, taking a beating from a global slide in stock markets as a string of poor economic data from the United States stoked concern about the global economic outlook.
China Life Insurance Co Ltd extended its slide to a 13-month low, down 8.6 percent in just two days on heavy volume. Investors dumped shares of the world's largest insurer by market value, fretting about its portfolio losses on a sliding stock market.
While China Life's slide took a toll on both the Hang Seng Index and Shanghai Composite Index, results from other blue-chip Chinese companies helped underpin the markets.
Industrial and Commercial bank of China Ltd (ICBC) rose 1.6 percent after the world's most valuable bank reported a record profit for the second quarter, even while warning of challenges ahead including bad loans.
China Unicom (Hong Kong) Ltd rose 2.7 percent after the company's first-half profit beat expectations on growth in its 3G service.
The slew of earnings this week from Chinese companies has generally beat expectations, but heightened worries about the U.S. economy from this week's grim housing data have taken a toll on Wall Street and global markets.
Traders said some overseas hedge funds had been picking up shares of mid-cap stocks this week, viewing them as better plays from a valuation perspective relative to large cap stocks -- especially consumer goods-related sectors such as sportswear and footwear companies.
One example was Anta Sports Products Ltd. Anta has soared more than 8 percent in the past three weeks even as the Hang Seng Index has retreated 5.5 percent.
"Hedge funds are looking to pad their portfolios with some of these mid-cap names that are trading quite cheaply," said the head of equity trading at a Korean bank in Hong Kong.
SHANGHAI LOWER
China's key stock index was down 0.3 percent by midday as stocks that had outperformed the market recently, such as drugmakers and coal counters, succumbed to profit-taking.
The Shanghai Composite Index ended the morning at 2,594.8 points, heading for a weekly loss of 1.8 percent this week and reversing a rise of 1.4 percent last week.
Qingdao Huaren Pharmaceutical Co Ltd was the morning's top loser, dropping 6.7 percent and Zhengzhou Coal Industry and Electric Power Co Ltd was among the top 10 decliners, losing 4.07 percent.
Drugmakers had outperformed the market recently mainly because of strong corporate earnings, while coal stocks had been supported by a government move to help consolidate the sector.
"Investors took a wait-and-see attitude towards what the government will do next in the property market," said Ren Chengde, senior stock analyst at Galaxy Securities in Shanghai. "That caution has capped market gains despite strong first-half corporate earnings."
The Shanghai index has climbed 12 percent since early July in a technical rebound after it plunged 27 percent from mid-April to early July mainly under pressure of an official campaign to clamp down on high property prices.
Zhang Ping, head of the National Development and Reform Commission, China's top economic planner, told parliament on Thursday that housing prices in some major cities remained too high and the government would continue to control them. ($1=6.8 Yuan) (Editing by Chris Lewis)