* Banking sector drags as Westpac results beat expectations but no special dividend
* Resources higher on metals prices and rise in iron ore exports to China from Port Hedland (Adds analysis, quotes, stocks on the move)
By Thuy Ong
SYDNEY, May 5 Australian shares slipped 0.2 percent on Monday morning, hurt by heavyweight Westpac losing ground on disappointment over the lack of a special dividend, caution over tensions in Ukraine and a weak Chinese manufacturing survey.
Investors have recently started to cut their exposure to the banking sector due to analysts' downgrades and concern their stocks have run up ahead of their ability to generate future earnings.
Westpac Banking Corp dropped 1.4 percent despite reporting a better-than-expected rise in first half cash profit.
"I think the reason we're seeing it trade down is because we have seen big expectation around a special dividend, said Julia Lee, an equities analyst at stockbroker Bell Direct.
Other banks were also trading lower, with Commonwealth Bank of Australia off 0.4 percent and Australia and New Zealand Banking Corp down 1.3 percent. The three banks had touched record highs last week driven by high dividend yields.
The S&P/ASX 200 index slipped 11.6 points to 5,446.5 by 0214 GMT, reversing modest early gains. The benchmark added 0.2 percent on Friday, but lost 1.3 percent for the week, snapping 6 consecutive weeks of gains -- the longest winning streak since August 2013.
Aquila Resources Ltd stole the limelight in morning trade, jumping 37 percent to near 2-year highs of A$3.36, after China's Baoshan Iron & Steel Co Ltd and Australia's Aurizon Holdings Ltd launched a $1 billion bid for the resources firm. Aurizon dropped 4.6 percent to 3-month lows of A$4.94.
Elsewhere, a private survey showed activity in China's manufacturing sector contracted for a fourth consecutive month in April, adding to questions about whether the world's second-largest economy is still losing momentum.
The weak data from Australia's biggest export market didn't trigger any large selling though it added to a cautious morning session amid tensions in Ukraine.
Pro-Russian militants stormed a Ukrainian police station in Odessa on Sunday and freed nearly 70 fellow activists as the country's leaders lamented a police force they said was widely undermined by graft or collaboration with separatists.
BHP Billiton Ltd climbed 0.9 percent and rival Rio Tinto Ltd gained 1 percent. Iron ore exports to China from Australia's Port Hedland, which accounts for about a fifth of the globally traded market, rose by almost 7 percent in April, from March when they jumped 27 percent.
Gold miners Newcrest Mining Ltd and Northern Star Resources Ltd jumped 3.4 percent and 5 after gold rose more than 1 percent as investors piled into the safe-haven resource on concerns in Ukraine.
Bendigo and Adelaide Bank Ltd were in a trading halt after the Australian regional bank said it plans to buy state-owned Rural Finance Corporation of Victoria for A$1.78 billion, a move it said would quadruple the size of its rural loan book.
New Zealand's benchmark NZX 50 index fell 0.5 percent or 27.3 points to 5,205.6.
(Reporting by Thuy Ong; Editing by Shri Navaratnam)