Seoul shares fall, pressured by banks, Fed caution

* KOSPI ends 0.88 pct lower as banks tumble

* Foreign investors sell after 20 buying sessions

* LG Display up on news of Japan quake, glass output halt

(Updates to close)

By Jungyoun Park

SEOUL, Aug 12 (Reuters) - Seoul shares fell on Wednesday,
led by losses in key banking issues such as KB Financial Group
(105560.KS) as investors turned cautious before an interest rate
decision by the U.S. Fed.

The Korea Composite Stock Price Index .KS11 (KOSPI)
finished down 0.88 percent at 1,565.35 points.

Foreign investors were sellers of a net 14.1 billion won
worth of stocks, snapping a 20-session buying streak.

"Falls in global stock markets, including those overnight on
Wall Street and current losses seen in regional markets
including China, are weighing on sentiment. It is obvious that
markets are undergoing technical corrections, and this will
continue for some time," said Kwak Joong-bo, a market analyst at
Hana Daetoo Securities.

"With options expiry and the U.S. Fed's rate decision
tomorrow, caution prevails in the markets, though I do not
expect surprises from the U.S. Fed," Kwak added.

Losses were led by financial issues including KB Financial
Group (105560.KS), which came under pressure after U.S.
financial stocks took a beating on bearish comments by a
prominent analyst and sent the S&P financial index .GSPF 3.53
percent lower.

KB Financial Group sank 3.94 percent and Hana Financial
Group (086790.KS) shed 4.72 percent.

But shares in LG Display (034220.KS) advanced 1.02 percent
after an earthquake disrupted glass production in Japan and may
deepen an ongoing shortage. [ID:nSEO37071]

"The news fueled expectations that more orders will go to
South Korean display makers including LG Display," said Lee
Ka-keun, an analyst at IBK Securities, adding that liquid
crystal display panel prices were also expected to rise.

Shares in LG Electronics (066570.KS), maker of consumer
electronics, also rose 3.37 percent.

Meanwhile shares in Green Cross (006280.KS) ended 0.79
percent higher after the South Korean vaccine said in a
statement it has signed an agreement with the World Health
Organization for joint development of vaccines for pandemic
influenza.

But other key blue chip issues fell, with Samsung
Electronics (005930.KS), the world's No. 1 memory chip maker and
the largest stock in the KOSPI, losing 1.7 percent, and POSCO
(005490.KS), the world's No. 6 steelmaker, shedding 2.64
percent.