Seoul shares post biggest daily pct loss in 4 mths

* KOSPI down 3.53 pct

* Reports of N.Korean leader's illness worry investors

* Shipbuilders fall on worsening worries about order drought

(Updates to close)

By Jungyoun Park

SEOUL, July 13 (Reuters) - Seoul shares fell 3.5 percent on
Monday, their biggest daily percentage loss in more than four
months, amid renewed U.S. financial and earnings worries, while
North Korea-related news added pressure.

The Korea Composite Stock Price Index (KOSPI)
finished down 3.53 percent at 1,378.12 points, its biggest daily
percentage decline since a 4.16 pct fall on March 2.

"News about liquidity problems at one of the larger U.S.
banks, CIT, renewed worries about U.S. financial markets. And
combined with massive falls in Taiwanese shares, Seoul markets
fell under pressure," said Kim Seung-han, a market analyst at HI
Investment Securities.

"Given the markets' latest gains, investors think potential
positive earnings news is already reflected, and reports of Kim
Jong-il's illness made matters worse," Kim added.

North Korean leader Kim Jong-il has pancreatic cancer and the
illness is life-threatening, South Korean broadcaster YTN said on
Monday based on information gathered by Chinese and South Korean
intelligence sources. [ID:SEO323451]

Analysts said the news highlighted South Korea's geopolitical
risks.

"[Reports of Kim's illness] came as market environment was
turning rapidly weaker, and accelerated the falls," said Kim
Yong-kyun, a market analyst at Daishin Securities.

Foreign investors were sellers of a net 229 billion won
($177.4 million), and institutions offloaded a net 103.3 billion
won.

Key blue chip issues tumbled, led by Samsung Electronics
(005930.KS), the largest share on the KOSPI and the world's No.1
memory chip maker, which fell 3.88 percent. LG Electronics
(066570.KS), the world's No.3 handset maker, declined 3.95
percent.

Shipbuilders also lost ground as concerns about the economy
were revived.

"Sentiment turned worse, and this fueled worries shipbuilders
may suffer a drought of orders," said Cho In-karp, an analyst at
Goodmorning Shinhan Securities.

Shares in Hyundai Heavy Industries (009540.KS), the world's
No.1 shipbuilder, sank 5.03 percent and Daewoo Shipbuilding &
Marine Engineering (042660.KS) fell 6.07 percent.

But shares in POSCO (005490.KS) finished down 1.26 percent,
outperforming the broader index, ahead of its quarterly earnings
as investors looked towards improvements from the third quarter.

Banks lost ground amid fresh worries about the health of
their U.S. peers, sending KB Financial Group (105560.KS), the
holding company of South Korea's largest commercial lender
Kookmin Bank, down 4.9 percent.

Elsewhere shares in NCSoft Corp (036570.KS) tumbled 11.5
percent to close at 142,500 won, the lowest finish since early
May on talk trials, or beta tests, of its new online game "Aion"
in Japan and Taiwan were not met with as much enthusiasm as
anticipated.
($1=1290.9 Won)