Seoul shares fall as oil hits transport; KT drops

(Updates to mid-morning)

SEOUL, July 11 (Reuters) - Seoul shares retreated from initial gains by mid-morning Friday as higher oil prices hit fuel cost-sensitive stocks such as airlines and shippers, while KT Corp (030200.KS) dropped on concerns over growing competition.

Technology heavyweights such as LG Electronics Inc (066570.KS) and Hynix Semiconductor Inc (000660.KS) rebounded from recent weakness, but a downturn in the financial sector offset the gains.

The Korea Composite Stock Price Index fell 0.23 percent to 1,533.84 points by 0105 GMT. On Thursday, the index briefly dipped below 1,500 points for the first time since April 10, 2007.

A 4 percent jump in oil prices CLc1 on Thursday hit airlines, with Korean Air (003490.KS) falling 3.24 percent to 41,850 won and Asiana Airlines (020560.KS) dropping 2.42 percent to 4,640 won.

Shipping firms also came under pressure, with STX Pan Ocean (028670.KS) down 2.42 percent to 2,015 won and Hanjin Shipping (000700.KS) losing 2.17 percent to 36,150 won.

KT, South Korea's top fixed-line and broadband operator, slid 5.03 percent to 43,400 won as its earnings guidance cut on Thursday fanned concern over a looming marketing war, prompting a raft of brokerage downgrades. KTF Co Ltd (032390.KS), KT's mobile unit, also fell 2.9 percent to 25,150 won.

But technology shares climbed, paring some of their recent losses on the won's KRW= gains, which could make their products more expensive abroad. LG Electronics rose 1.85 percent to 110,000 won and Samsung Electronics Co Ltd (005930.KS) climbed 1.07 percent to 566,000 won.

Hynix Semiconductor jumped 3.08 percent to 23,400 won.

Despite gains on Wall Street overnight, foreign investors continued to dump South Korean shares.

They were net sellers for the past 24 consecutive sessions, with a higher won providing an incentive to offload shares and convert proceeds at more favourable rates. (Reporting by Rhee So-eui; editing by Jonathan Hopfner)