Seoul shares up 0.2 pct on techs; Shinhan falls

* KOSPI gains for a third session

* Technology shares, shipbuilders fuel advance (Updates to close)

By Jungyoun Park

SEOUL, Sept 3 (Reuters) - Seoul shares rose on Friday led by technology issues such as Hynix Semiconductor Inc (000660.KS) and LG Electronics Inc (066570.KS) following their recent substantial falls, but Shinhan Financial Group Co Ltd (055550.KS) retreated amid a scandal involving the group CEO.

The Korea Composite Stock Price Index .KS11 (KOSPI) ended up 0.24 percent at 1,780.02 points.

"The market is edging up helped by U.S. share gains, but investors are largely cautious ahead of key U.S. monthly payroll data," said Kim Hyoung-ryoul, a market analyst at NH Investment & Securities.

Technology stocks climbed after a 2 percent rise in the key U.S. semiconductor index .SOX.

Hynix, the world's No.2 memory chip maker, rose 3.3 percent and Samsung Electronics Co Ltd (005930.KS), the world's No.1, gained 0.3 percent.

LG Electronics, the world's No.3 handset maker, rose 2.4 percent. LG Display Co Ltd (034220.KS), the world's No.2 flat panel maker, climbed 3.4 percent.

But Shinhan Financial extended its fall for another session, losing 1.9 percent after its bank unit on Thursday sued the chief executive of the parent group over alleged breach of trust. [ID:nTOE68104I]

"The reports are very negative to investor sentiment towards Shinhan ... if the CEO was involved in issuing loans without proper procedures, as alleged, it will be very damaging to the bank's image," said Jason Choi, an analyst at Woori Investment & Securities.

Shipbuilders were boosted by a 3.4 percent rise in the Baltic Dry Index .BADI, which tracks the cost of shipping key commodities.

Daewoo Shipbuilding & Marine Engineering Co Ltd (042660.KS) rose 1.1 percent and STX Offshore & Shipbuilding (067250.KS) advanced 4.1 percent.

Defensive issues, which had recently outperformed, declined as investors grew more optimistic about the economy.

Lotte Shopping Co Ltd (023530.KS), the country's No.1 retailer, fell 0.6 percent. Ice cream maker Lotte Samkang Co Ltd (002270.KS) gained 3.4 percent.