* Hang Seng flat, posts 0.7 pct loss on week
* Shanghai up 1.1 pct, closes below 250-day moving avg
* Energy counters weak in HK; oil, coal majors decline
* Turnover remains low; investors await inflation data
* Chinese airlines hit oil prices, rotation into rail
(Updates to close)
By Vikram S.Subhedar and Farah Master
HONG KONG/SHANGHAI, Dec 10 (Reuters) - Hong Kong and Shanghai shares ended the week mildly lower on Friday in thin volume as inflation data due over the weekend and talk of an interest rate increase in China sidelined investors.
Concerns about further tightening in China have kept turnover muted in both markets and has also prompted funds to pull some money out of Chinese markets, even as retail investors avoided taking large positions ahead of the weekend.
Hong Kong's Hang Seng ended little changed on the day, and down 0.7 percent for the week. Turnover on Friday fell to HK$69.6 billion, the lowest in nine days.
The Shanghai Composite climbed 1.1 percent on the day as strong trade data encouraged some investors to take on a little more risk heading into the weekend, but low volumes suggested market players were avoiding building large positions. The index ended the week marginally lower.
China's imports and exports were much stronger than expected in November, robust numbers that could clear the way for the central bank to raise interest rates again as soon as this weekend. [ID:nTOE6B901S]
"The worry over a rise in interest rates is getting old. The market is likely to rebound next week," said Wen Lijun, analyst at Nanjing Securities.
The heavy-weighted financial sector, target of much speculation in recent weeks amid talk of rising interest rates, supported the Shanghai market with insurers leading gains on expectations that higher rates would boost investment income.
Insurers outperformed with Ping An up 2.9 percent and China Life up 1.9 percent. Most banks gained led by China Merchants Bank , up 1.2 percent.
Banks were mixed in Hong Kong, however, with China Construction Bank rising 0.3 percent and larger rival ICBC slipping 0.5 percent.
Beside the risk of net interest margins shrinking as a result of deposit rates rising faster than lending rates, there were also concerns that big banks may have to cut dividends to conserve capital, which would affect yield-seeking investors, said Ming Tan, head of financials research at Yuanta.
"We are coming to year-end and funds are closing their books and avoiding big bets as they won't have time to make up for any losses, especially given market expectations of interest rate rises in the near future," said Tan.
According to Citigroup Global Research, the week ended Dec 8 saw redemptions from China-focused equity funds ahead of the release of inflation data on Saturday and any hike in rates, the brokerage said in a note, citing EPFR data.
Energy counters were a drag on the Hong Kong market, with coal majors continuing to underperform and further weakened by last week's move by the Chinese government to freeze thermal coal contract prices. [ID:nTOE6B1010]
China Coal , down 1.9 percent on the day, is down over 18 percent in the past month. China Shenhua is down nearly 19 percent in the past month.
Chinese airlines had a rough week after a strong run since May this year. China Southern Airlines Co Ltd was set to suffer its worst week in about 18 months as investors exited in favour of the railway sector. ($1=6.648 Yuan)
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