Seoul shares drop on U.S. budget stalemate, chipmakers weak
* KOSPI near 4-week intraday low level
* Foreigners re-position as net buyers
* Tech shares drop on profit-taking
SEOUL, Oct 8 (Reuters) - Seoul shares edged lower on Tuesday morning alongside regional bourses, failing to gain momentum as the U.S. budget standoff dragged on, while a market closure and an upcoming options expiration day kept investors sidelined.
The Korea Composite Stock Price Index (KOSPI) was down 0.5 percent at 1,985.14 points as of 0200 GMT after touching an intraday low of 1,981.21, its lowest since Sept.10. Local markets are closed on Wednesday due to a public holiday.
Global stocks weakened overnight as nothing amounting to a breakthrough was in sight in Washington after seven days into a U.S. government shutdown and only 10 days from a critical deadline to raise the U.S. debt ceiling.
"Investors are fretting about the U.S. political standoff's negative effect on the real economy as well as beginning to be doubtful of a settlement before the October 17th deadline," said Choi Kwang-hyeok, an analyst at E-Trade Securities.
Earlier in the day, a private survey showed growth in China's services industry slowed in September, indicating the recovery in South Korea's largest export market was likely to remain slow.
Foreigners initially positioned themselves as net sellers in the morning but re-positioned as net buyers, purchasing a modest 3.8 billion won ($3.55 million) worth of local shares to stay on track for a 29th consecutive session of net buying.
Defensive sector plays outperformed as preference for safer issues strengthened. SK Telecom Co Ltd advanced 1.7 percent and LG UPlus Corp was up 0.5 percent.
Investors locking in profits as well as falls in the U.S. semiconductor index weighed on memory chip makers, with Samsung Electronics Co Ltd and SK Hynix Inc dropping 0.8 percent and 0.7 percent, respectively.
LG Electronics Inc also dropped 1.5 percent on profit-taking, despite saying on Monday it would start mass production of curved smartphone displays to compete with its rival Samsung Electronics. LG Display Co Ltd shares traded flat.
Hanjin Shipping Co Ltd outperformed the broader market by advancing 2.1 percent, after the Baltic dry index, which measures the cost of shipping key commodities, posted a 1.5 percent gain overnight.
Decliners outnumbered advancing shares 576 to 209.
The KOSPI 200 benchmark of core stocks was down 0.5 percent, while the junior KOSDAQ edged 0.3 percent lower.
($1 = 1071.5250 Korean won) (Reporting by Jungmin Jang; Editing by Jacqueline Wong)
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