Seoul shares drop despite output growth, as U.S. debt row weighs
(Updates to midday)
* Seoul shares fall alongside regional markets
* Automakers, shipbuilders fall as investors lock in profits
* SK Holdings fall in absence of its chairman, vice chairman
SEOUL, Sept 30 (Reuters) - Seoul shares fell alongside other regional markets on Monday morning despite stronger-than-expected South Korean industrial output and a factory survey in China, that showed South Korea's main export market remained in recovery mode.
The general weakness stemmed from investors caution due to a row in the United States over the government debt ceiling.
The Korea Composite Stock Price Index (KOSPI) was down 0.7 percent at 1,997.11 by 0225 GMT after touching an intraday low of 1,994.22.
The Seoul market, along with others, suffered as investors fretted over a political impasse in the United States that could curtail government spending in the world's biggest economy. During the weekend, Republicans and Democrats extended their search for a deal on funding the government before the fiscal year ends at midnight on Monday.
Earlier in the day, data showed South Korea's industrial output in August rose 1.8 percent from the previous month, beating the median forecast from a Reuters survey of economists.
Also, a survey of China's factories indicated the recovery intact on the world's second largest economy. The final September HSBC manufacturing purchasing managers' index (PMI) was at 50.2, holding just above the 50-mark that divides expansion from contraction, though the reading was below last week's flash reading of 51.2.
"China's manufacturing data is below market expectations, although a figure over 50 point level does indicate an improvement in the economy," said Mirae Asset Securities analyst Chung Seung-jae, before adding, "higher figures from official China PMI could help overturn the direction of the market."
Official September PMI and HSBC services PMI are due on Tuesday and Friday, respectively.
Foreign inflows extended, on track for a 24th consecutive session of net buying as foreigners purchased a modest 27.9 billion won ($25.99 million) worth of local shares in the morning.
Market heavyweight Hyundai Motor Co fell 1.8 percent on profit-taking, while its affiliates Kia Motors Corp and Hyundai Mobis Co Ltd also fell 1.7 percent and 2 percent, respectively.
Investors also locked in profits from shipbuilders, with Doosan Heavy Industries & Construction Co Ltd and Samsung Heavy Industries Co Ltd falling 2.4 percent and 2.2 percent, respectively. The sector rose 2.6 percent last week.
SK Holdings Co Ltd fell 1.5 percent after its chairman Chey Tae-won and vice chairman Chey Jae-won were sentenced to jail terms for embezzling corporate funds.
Decliners outnumbered gaining shares 580 to 230.
The KOSPI 200 benchmark of core stocks fell 0.7 percent, while the junior KOSDAQ also dipped 0.5 percent. ($1 = 1073.6500 Korean won) (Reporting by Jungmin Jang; Editing by Simon Cameron-Moore)