Seoul shares at 12-wk low as chips, banks fall

(Updates to mid-morning)

By Park Jung-youn

SEOUL, June 23 (Reuters) - Seoul shares fell to their lowest
level in 12 weeks on Monday, with financials and memory chip
makers struggling on renewed worries about the credit crunch and
corporate earnings amid mounting inflation pressure.

The Korea Composite Stock Price Index was down 1.77 percent
to 1,700.36 points as of 0127 GMT. It is still up 10.6 percent
from the mid-March low of 1,537.53, but down 10.6 percent from
the year's high of 1,901 reached mid-May.

The index had earlier lost more than 2 percent in the morning
session, falling to 1,694.79 points, its lowest since April 1.

"Unless there are improvements in market factors, namley oil
prices, the index will continue to test a new bottom," said Kim
Joong-hyun, a market analyst at Goodmorning Shinhan Securities.

"We are at a critical juncture here as the main index has
erased nearly half of its gains made since the mid-March low.
Comments and views following the major monetary decisions, like
the U.S. Fed's interest rate and its stance, will likely
determine whether the market will recover from here, or fall
further below to its earlier low," said Kang Hyun-cheol, a market
strategist at Woori Investment & Securities.

"Eyes are on the Fed's stance and its impact on oil prices,"
Kang added, referring to a two-day meeting of the Federal Reserve
Open Market Committee to set rates, starting on Tuesday.

Memory chip makers such as Samsung Electronics (005930.KS)
and Hynix Semiconductor (000660.KS) came under pressure on an
increasingly grim outlook for tech sectors after a U.S. brokerage
downgraded its rating on Sandisk Corp (SNDK.O), the world's No.1
supplier of flash memory-based data storage cards used in music
players and mobile phones.

Samsung Elec lost 2.1 percent to 654,000 won and Hynix fell
2.5 percent to 27,250 won.

Hyundai Motor, South Korea's biggest carmaker, also retreated
after S&P said it may cut its ratings on U.S. carmakers such as
General Motors (GM.N) and Chrysler LLC, citing financial damage
from high gasoline prices [ID:nN20284169].

Hyundai Motor (005380.KS) slid 2.05 percent to 76,600 won.
Kia Motors (000270.KS) fell 0.42 percent to 11,750 won.

Financials such as Shinhan Financial Group (055550.KS) and
Hana Financial Group (086790.KS) retreated after shares in major
U.S. banks tumbled on talk of profit warnings and additional
write-downs on mortgage holdings, pushing down shares in banks
such as Merrill Lynch MER.N.

Shinhan fell 1.6 percent to 46,200 won and Hana fell 2.55
percent to 40,100 won.

However, shares in Hankook Tire (000240.KS) South Korea's top
tyre maker, rose 2.65 percent to 15,500 won on market speculation
that French tyre maker Michelin (MICP.PA) may be buying more
shares in Hankook after it raised its stake to 8.9 percent on
June 18. [ID:nSEO149519]

According to Monday Korea Exchange data, HSBC (HSBA.L)
(0005.HK) was one of the most active buyers, which triggered
talk that Michelin was building up a stake through HSBC.

HSBC last week bought heavily into Hankook Tire on behalf of
the French tyre maker.

Also bucking the trend Lotte Confectionary Co Ltd (004990.KS)
rose 0.92 percent to 1,212,000 won after the company said it
planned to acquire Belgian chocolate maker Guylian NV for 105
million euros ($164 million) [ID:nSEO31580].

Daewoo International (047050.KS) rose 0.11 percent to 45,250
won on news its Myanmar gas consortium had agreed to sell natural
gas to China National Petroleum Corp [ID:nSEO213949].