Seoul shares end firm; blue chips, LG Innotek rise

* KOSPI trades firm, up 0.13 pct

* State-run utilities rise after power tariff hike

* LG Micron, Innotek rally ahead of their merger
(Updates to close)

By Jungyoun Park

SEOUL, June 26 (Reuters) - Seoul shares ended firm on Friday
led by key blue chips including Samsung Electronics (005930.KS),
with a rally in LG Innotek (011070.KS) lending further support.
But Doosan Heavy (034020.KS) fell after share sale news.

The Korea Composite Stock Price Index (KOSPI)
finished up 0.13 percent at 1,394.53 points.

"Shares are moving with in a boxed range following
yesterday's big gains and there is a lack of upward momentum.
Investors will likely remain cautious ahead of key domestic and
global economic data next week," said Kim Young-june, a market
analyst at SK Securities.

"But South Korean markets certainly have companies that are
strong survivors of the global economic downturn and financial
crisis. An extended, large-scale fall is unlikely," Kim added.

Separately, Morgan Stanley downgraded South Korean stocks to
"underweight" from "equal-weight" and said South Korea was its
"single largest active risk position". [ID:nSEO319066]

"We think it is a good time to initiate an underweight of
Korea after a burst of relative outperformance of 8 percent since
the start of the month," Morgan Stanley said in its report dated
June 25.

Display parts maker LG Micron (016990.KQ) jumped ahead of its
absorption into LG Innotek (011070.KS), scheduled for early July.
Korea Exchange said Friday was the last trading day for LG
Micron.

Shareholders of LG Micron will receive 0.476786 shares of LG
Innotek for each LG Micron share they hold. [ID:nSEO235027]

"Both component makers are expected to post strong earnings
for the second quarter thanks to rising sales at their major
client LG Electronics (066570.KS)," said Daishin Securities
analyst John Park.

"Investors see it is reasonable to buy LG Micron shares now
to receive LG Innotek shares, considering the new LG Innotek's
potential," Park added.

Shares in LG Micron climbed 7.07 percent, and LG Innotek
advanced 5.56 percent.

The new LG Innotek 016990.KS will be listed on July 16,
according to its filing to Korea Exchange.

Doosan Heavy Industries & Construction (034020.KS) tumbled
4.38 percent after it sold some of its own shares.

Early on Friday, online news outlet MoneyToday reported that
Doosan Heavy had unloaded 3 million shares prior to the market's
opening.

A Doosan Heavy spokesman confirmed the sale, without
specifying a reason.

"Doosan probably sold shares at a discount, and in such cases
there is bound to be quick profit-taking as investors who bought
the discounted shares can realise immediate profits by doing so,"
said Cho In-karp, a market analyst at Goodmorning Shinhan
Securities.

But shares in state-run utilities Korea Electric Power Corp
(KEPCO) (015760.KS) and Korea Gas Corp (KOGAS) (036460.KS)
climbed after South Korea's energy ministry said on Friday that
South Korea will raise electricity prices by 3.9 percent on
average this week, the first increase since November.
[ID:nSEL00066]

KEPCO rose 0.34 percent KOGAS surged 4.25 percent.