Seoul shares retreat led by techs, retail issues

*KOSPI down 2.6 pct

*Foreign investors extend selling streak

*Hynix declines on DRAM price weakness

(Updates to midmorning)

By Jungyoun Park

SEOUL, Feb 17 (Reuters) - Seoul shares declined on Tuesday,
with technology issues including Hynix (000660.KS) leading losses
on a weak industry outlook, but C&Heavy 008400.KS continued to
rally on expectations for its sale.

The Korea Composite Stock Price Index had retreated
2.56 percent to 1,145.30 points as of 0156 GMT.

"Continued foreign selling, and growing views that the main
index will not likely rise meaningfully above the 1,200-point
level for some time amid the current economic difficulties, are
weighing on stocks," said Kim Seong-bong, a market analyst at
Samsung Securities.

Foreign investors were net sellers for an sixth straight
session, offloading a net 33.8 billion won worth of shares.

"The won's weakness against the dollar ... is also hurting
investor sentiment," Kim said, adding that the main index was
likely to remain stuck around the 1,100-1,200 point range it has
traded in since early December 2008.

News that Standard & Poor's on Monday sharply lowered its
forecast for South Korea's economic growth this year to negative
3.5 percent dealt the market a further blow. [ID:nSEO109552]

Shares in Hynix Semiconductor (000660.KS) led falls, dropping
5.92 percent to 8,420 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.

Meanwhile retail issues including Lotte Shopping Co Ltd
(023530.KS) fell despite robust January sales growth.

South Korea said on Tuesday sales at top department stores in
January increased at the fastest pace in 6 months, lifted by the
Lunar New Year holiday shopping spree, but warned the recovery
was seen as temporary. [ID:nSEO100563]

Lotte Shopping fell 2.84 percent and Shinsegae Co Ltd
(004170.KS) retreated 3.84 percent.

Meanwhile 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 Jonathan Hopfner)