Australia shares dip on weak iron ore prices; investors eye HK protests

* ASX 200 dips 0.5 pct in broad sell-off; banks, miners slump

* 90 shares higher, 92 shares lower, 17 shares unchanged

* Traders also cautious on Hong Kong demonstrations (Adds analysis, quotes, stocks on the move)

By Thuy Ong and Gyles Beckford

SYDNEY/WELLINGTON, Sept 29 (Reuters) - Australian shares shed 0.5 percent on Monday, led by blue chip stocks as a slump in iron ore prices continued to hamper miners and investors were wary of growing protests in Hong Kong.

The top 20 stocks in the ASX 200 led the broad-based sell-off with top-tier banks Westpac Banking Corp down 0.3 percent, while Australia and New Zealand Banking Group fell 0.2 percent. ANZ said it has agreed to sell its 17.5 percent stake in Vietnam's Saigon Securities Incorporation (SSI)

Kara Ordway, a market maker and trader at City Index in Sydney, said the pullback was "more broadbased and less sector specific".

Miners continued to spiral downwards as iron ore supply continued to outstrip demand. Iron ore for immediate delivery to China lost 1 percent to $78.60 a tonne, the lowest since September 2009.

BHP Billiton Ltd shed 0.6 percent, while rival Rio Tinto Ltd lost 0.7 percent.

The S&P/ASX 200 index lost 24.3 points to 5,289.1 by 0227 GMT after touching a 7-1/2-month low of 5,259.9 earlier in the session.

The benchmark dropped 1.3 percent on Friday, and lost 2.2 percent last week, its fifth consecutive week of losses and its longest losing streak since January. It has erased its year-to-date gains over September, and is down 1 percent for the year.

The benchmark hit a 6-year intraday peak of 5,679.5 points on Aug. 21, but has since tumbled some 380 points to hover at February lows, driven down by a slump in iron ore prices, a weaker Australian dollar and caution on slowing growth in China, Australia's largest export market.

Analysts said markets were also cautious on the protests in Hong Kong.

"Escalating tensions in Hong Kong and softer data over the weekend from China adding uncertainty to their growth outlook has rattled the cages of investors allowing the bears to take charge of proceedings once again," said Niall King, a sales trader from CMC Markets in a note to clients.

China last month rejected demands for people to freely choose the city's next leader, wanting to limit elections to a handful of candidates loyal to Beijing, sparking waves of demonstrations.

A handful of defensives bucked the broader trend to trade higher, with blood products maker CSL Ltd (Other OTC: CMXHF - news) adding 0.2 percent, while Australia's biggest telecommunications provider Telstra Corporation Ltd rose 0.4 percent.

Treasury Wine Estates Ltd tumbled 14 percent to their lowest level since mid-May after it called off takeover talks with two private equity firms valuing it at $3 billion.

Lynas Corporation Ltd was routed 22.2 percent to A$0.089, its lowest since February 2009 after it said it was seeking to raise A$83 million through a discounted share placement and rights issue to shore up its balance sheet.

New Zealand stocks were firm but trimmed their gains with the benchmark NZX50 index up 0.1 percent at 5,258.81. At one stage it was close to 0.5 percent higher and within sight of last Thursday's record high of 5,289.50.

Most leading stocks were a touch firmer, with the stand out performer being software company Xero, which bounced 2.9 percent higher to NZ$21.24 as it recouped Friday's losses.

Clothing retailer Hallenstein Glasson was 3.1 percent firmer at NZ$3.30 as the positive reaction to last week's annual result continued.

Among the bigger falls was part-privatised power company Meridian Energy, down 5.2 percent at NZ$1.455, as it adjusted after shedding its dividend rights last week. (Reporting by Thuy Ong; Editing by Jacqueline Wong)