* Market cautious before FOMC meeting next week
* Samsung Elec shares slip after Q2 results, outlook
* Defensive sector, STX outperform
SEOUL, July 26 (Reuters) - Seoul shares were flat on Friday with investors cautious ahead of the U.S. Federal Reserve's policy-setting meeting next week, while the market's biggest component Samsung Electronics slipped after posting record second-quarter profit.
The Korea Composite Stock Price Index (KOSPI) was up 0.1 percent at 1,911.50 points as of 0135 GMT.
"There are not many compelling reasons to buy at the moment, particularly before major financial events including the FOMC meeting next week," said Park Jeong-woo, a market analyst at Samsung Securities.
"Profit-taking appetite abounds. Investors are acting more defensively," Park added.
Samsung Electronics Co Ltd shares edged 0.5 percent lower in mid-morning trade after posting a record $8.5 billion operating profit.
The company is under mounting pressure to produce eye-catching new smartphones after its mobile business shrank 3.5 percent in the second quarter. The company said it expected its average selling prices of smartphones to decline slightly in the third quarter, because of the growing portion of mid-and low-end smartphones.
POSCO, the third-biggest share on the main KOSPI, was down 0.9 percent after the company late on Thursday forecast flat second-half profits and warned steel prices would fall further this year due to the economic slowdown in top consumer China.
Its earnings were slightly better than analysts' forecasts, despite a 36 percent year-on-year drop in operating profit.
But Hyundai Motor Co, the second biggest share on the main KOSPI, rose 0.9 percent, continuing its gains for a third session after reporting forecast-beating earnings an hour before the stock market closed on Thursday.
Defensive issues outperformed. Shares in Orion Corp , a snack manufacturer, were up 1.7 percent. Lotte Chilsung Beverage Co Ltd rose 1.1 percent.
Shares in ailing STX Group affiliates continued to rally amid expectations for a rescue cash injection.
Shares in STX Offshore & Shipbuilding jumped 9.2 percent as creditors were nearing a decision to inject an extra 2.15 trillion won by 2017 to rescue the shipbuilder, according to sources with direct knowledge of the matter.
STX Pan Ocean Co Ltd shares spiked 11.2 percent, continuing to be helped by comments from the chairman of its main creditor Korea Development Bank (KDB) on Wednesday that the bank was mulling over an unspecified financial injection into the cash-strapped bulk shipper.
Airlines and tour issues held firm as the summer vacation season is expected to peak in August. The prolonged monsoon season is due to end by end-July or early next month.
Shares in Korea Air Lines Co Ltd and Hanatour Service Inc both climbed 1 percent.
The KOSPI 200 benchmark of core stocks was up 0.02 percent, while the junior KOSDAQ rose 0.45 percent. (Reporting by Jungyoun Park; Editing by Jacqeline Wong)