Seoul shares down 1.3 pct; shipbuilders, techs fall

* KOSPI declines 1.3 pct on institutional, foreign selling

* Shipbuilders tumble amid deepening shipping sector fears

* Blue chips in tech, auto sectors extend losses (Updates to mid-morning)

By Jungyoun Park

SEOUL, Oct 28 (Reuters) - Seoul shares declined on Wednesday as caution prevailed ahead of key earnings and economic data this week including results from Samsung Electronics (005930.KS), while losses by shipbuilders weighed heavily on markets.

Analysts said U.S. stock losses on Tuesday and foreign selling pressured markets, while worries about the H1N1 virus spreading rapidly, further hurt sentiment.

"Markets reacted weakly to strong gross domestic product data and earnings, and it appears caution is prevailing at large, as global economies and financial markets are still seen in fragile shape," said Kim Seong-bong, a market analyst at Samsung Securities.

"And recent news about influenza, which worsens fears about its seemingly accelerating spread, is an added negative. It could curtail holiday shopping in the United States, for instance, and dent fourth quarter earnings of retailers and manufacturers," Kim added.

The Korea Composite Stock Price Index .KS11 (KOSPI) was down 1.29 percent at 1,628.29 points as of 0140 GMT.

Foreign investors were sellers of a net 79 billion won ($66.41 million) worth of stocks, snapping a three-session consecutive buying streak, and institutions offloaded 70 billion won worth of shares.

Key technology and auto issues retreated, with Samsung Electronics (005930.KS), the world's No.1 memory chip maker, losing 1.48 percent and LG Electronics (066570.KS), an electronics giant, falling 3.81 percent.

Hyundai Motor (005380.KS), South Korea's No.1 automaker, shed 1.71 percent.

Shipbuilders also fell across the board amid worsening fears about the shipping industry, following a Financial Times report that leading German container shipper Peter Dohle Schiffahrts was seeking financial help from the German government.

"Global shippers are in financial trouble, and signs of the industry's bottom are nowhere in sight," said Yeom Dong-eun, an analyst at IBK Securities.

"We think the current downturn will likely continue through 2011...it looks like a long-term industry slowdown," Yeom added.

Shares in Hyundai Heavy Industries (009540.KS), the world's No.1 shipbuilder, fell 3.65 percent and Daewoo Shipbuilding & Marine Engineering (042660.KS) declined 3.01 percent.

But shares in SK Chemicals (006120.KS) outperformed, advancing 1.35 percent, helped by a positive brokerage note and strengthening earnings expectations.

"We expect SK Chemicals to post strong growth in its earnings for the third quarter, and momentum will continue into the fourth quarter" with European approval of the SID-530 drug manufactured by the firm expected, Tong Yang Securities said in a note on Wednesday.

Tong Yang implied SK Chemicals shares could rise as high as 152,000 won, but "conservatively" maintained its price target at 119,000 won.

Elsewhere, South Korea's state-run Korea Gas Corp (KOGAS) (036460.KS) lost 3 percent after the company said late on Tuesday its net loss for the third quarter widened from a year ago to 125.1 billion won.

($1=1189.5 Won) (Reporting by Jungyoun Park; Editing by Jacqueline Wong)