Seoul shares close at 3-wk low; techs, banks fall

*KOSPI down 4.11 pct, lowest close in 3 weeks

*Foreign investors extend selling streak

*Hynix declines on DRAM price weakness

(Updates to close)

By Jungyoun Park

SEOUL, Feb 17 (Reuters) - Seoul shares ended 4.1 percent
lower on Tuesday at its lowest close in more than 3 weeks, with
techs such as Hynix (000660.KS) leading the fall on a grim
industry outlook, while banks were weighed down by the weaker
won.

The Korea Composite Stock Price Index finished down
48.28 points at 1,127.19 points, the lowest close since 1,093.40
points on Jan 23.

"Uncertain fate of General Motors (GM.N), which has great
implications about the U.S. manufacturing sector health and the
country's employment figures, are weighing on sentiment, fueling
foreign selling," said Kim Hak-kyun, a market analyst at Korea
Investment & Securities.

General Motors Corp and the United Auto Workers union made
progress in concession talks and bond holders offered proposals
to slash GM's debts on Monday, a day before the automaker must
detail a new survival plan.[ID:nN16325647]

"The index will move in the range between 1,100 and 1,200
points for the next couple months as macroeconomic conditions
remain weak," Kim added.

Foreign investors were net sellers for an sixth straight
session, offloading a net 128.84 billion won worth of shares.

"The weaker won is also pressuring shares that are sensitive
to costs of importing raw materials," said Park Suk-hyun, a
market analyst at Eugene Investment & Securities.

Declining stocks were led by South Korean banks, which
retreated across the board as worries about the sector's outlook
deepened amid the won's weakness, while persistently bearish
economic news also weighed on sentiment.

"I'd like to ask, at times like this, would you buy a banking
issue? The weaker won will make foreign currency debts more
burdensome, and intermarket borrowing rates are not going down
despite the interest rate cuts," said Lee Byung-gun, a market
analyst at Shinyoung Securities.

South Korean won lost nearly 2 percent against the dollar.

"Continued weakness in economic indicators point to the
likelihood of further deterioration in banks' financial health,"
Lee added.

KB Financial Group (105560.KS) fell 4.82 percent and Hana
Financial Group (086790.KS) lost 9.68 percent.

Shares in Hynix Semiconductor (000660.KS) also tumbled 8.27
percent to 8,210 won on the latest weakness in DRAM chip prices
and a negative brokerage note.

According to DRAMeXchange, spot prices for DRAM fell around 4
percent on Monday.

"DRAM prices, which had risen briefly after Qimonda's
(QMNDQ.PK) filing for insolvency, are retreating yet again, will
probably fall further as the demand for memory chips remains
weak," said Song Myung-sup, an analyst at HI Investment &
Securities.

Meanwhile JP Morgan downgraded its rating on Hynix to
"underweight" from "neutral."

"Hynix is on the avoid side of our (Asia-Pacific) tech
trading portfolio," JP Morgan said. "The downside risk to demand
outpaces the supply reduction." JP Morgan kept its target price
on Hynix shares at 8,000 won.

But shares in troubled shipbuilder C&Heavy Industries rose
for a 15th consecutive session, rising 14.88 percent on Tuesday
on expectations for its sale, after major creditors said late
last week that they had selected Lazard (LAZ.N) and Mirae Asset
Securities (037620.KS) as lead managers for the deal.

"Shares are up on sale expectations, but I think they are
overreacting," said Cho In-karp, an analyst at Goodmorning
Shinhan Securities.

(Editing by Ken Wills)