Seoul shares rally; banks up on Fannie/Freddie news

*Financials jump on Freddie, Fannie rescue news

*Shipbuilders rise after losses, improved sentiment

*Airlines gain on stronger won

(Updates to midmorning)

By Park Jung-youn

SEOUL, Sept 8 (Reuters) - Seoul shares opened higher on
Monday after the U.S. government took control of mortgage
companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N), easing
credit worries and sending financials higher.

Banking issues led the rally, led by Woori Finance Holdings
(053000.KS), which rose 14.5 percent to 15,000 won. Kookmin Bank
060000.KS gained 6.79 percent to 59,800 won and Shinhan
Financial Group (055550.KS) was up 7.34 percent to 49,700 won.
Hana Financial Group (086790.KS) rose 5.02 percent to 37,650 won.

"Banks with a higher portion of riskier assets are making the
most gains," said Park Jung-hyun, an analyst at Hanwha
Securities. "Woori Finance Holdings, which is said to hold more
Fannie and Freddie linked bonds than other banks, is jumping. The
rally will likely continue until there is some sort of news on
discounts to securities related to Fannie and Freddie."

The Korea Composite Stock Price Index was up 3.74
percent at 1,456.88 points as of 0112 GMT.

"The news of the U.S. government's rescue of Fannie and
Freddie comes as a huge relief to investors, and Asian markets
including that of Korea are the first ones to reflect
improvements in investor sentiment," said Lee Kyoung-su, a market
analyst at Taurus Investment & Securities.

Foreigners were net buyers of 66 billion won ($59.07 million)
worth of local shares as of 0112 GMT.

Brokerages also gained across the board, after the country's
financial regulator said on Monday that the Korea Exchange will
exempt trading fees from Sept 22, as part of the efforts to
stimulate financial markets.

Samsung Securities (016360.KS) rose 11.37 percent to 66,600
won and Woori Investment & Securities gained 9.79 percent to
20,750 won. Daewoo Securities (006800.KS) went up 9.73 percent to
16,350 won.

Exporters climbed on hopes that easier credit worries may
also improve consumer sentiment in South Korea's second-biggest
export market, sending Hynix Semiconductor (000660.KS) 5.48
percent higher to 18,300 won, and Samsung Electronics (005930.KS)
up 3.27 percent to 537,000 won.

Hyundai Motor (005380.KS) rose 2.25 percent to 72,600 won and
LG Electronics (066570.KS) added 3.28 percent to 97,700 won.

Shipbuilders gained after their latest losses, helped also by
the strength in won currency.

"We are seeing contract prices on ship steadily rising.
Shipbuilding shares' latest falls were mainly due to worries
about weakening won currency," said Martin Song, an analyst at
Woori Investment & Securities.

South Korean won currency KRW= hit a one-week high against
the dollar early on Monday as authorities were seen selling
dollars to lift the local currency [ID:SEO156802].

Hyundai Heavy Industries (009540.KS) rose 8.14 percent to
239,000 won, and Hyundai Mipo Dockyard (010620.KS) gained 11.93
percent to 159,500 won. Samsung Heavy (010140.KS) went 6.47
percent up to 29,600 won.

Airlines also rose due to gains in the won currency, easing
concerns about their foreign currency denominated debts. Korean
Air Line (003490.KS) was up 6.04 percent to 39,500 won and Asiana
Airlines (020560.KS) was up 2.87 percent to 4,305 won.

($1=1117.3 Won)