Seoul shares end rally, but POSCO hits record

SEOUL (Reuters) - Seoul shares retreated from a one-month high early on Wednesday as recent outperformers such as Hyundai Heavy fell on worries a four-day rally had been excessive given persistent doubts about the economy and corporate profits.

Woori Financial Group (053000.KS) fell 0.63 percent to 23,850 won ahead of its fourth-quarter earnings due out later in the day.

But broader gains were supported after steel maker POSCO Co. Ltd. (005490.KS) hit a new record a day after announcing a nearly $1 billion share buyback, while LG Electronics Inc. (066570.KS) rose after winning a contract to produce low-cost mobile phones.

"The market has gained a lot and there are uncertainties about whether these gains are sustainable," said Kim Joon-kie, an analyst at SK Securities.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 0.35 percent to 1,423.56 points by 0120 GMT, after earlier hitting its highest intraday level since January 3.

South Korea's benchmark KOSPI rose 5 percent over the past four sessions, nearly erasing its loss for the year, amid heavy foreign investor buying that some analysts are attributing to funds flowing into the markets after a tumble in China's Shanghai index. .SSEC

"It looks like foreigners were selling in China and buying in Korea, so the shift in their portfolios helped domestic markets gain. If that continues, we could see some more gains," said Choo Hee-yeop, deputy general manager of asset management strategy at Korea Investment and Securities.

But the gains had also brought the KOSPI's relative strength index to 73.8 on Tuesday, above the 70-point level at which a stock or index is generally seen as technically overbought.

Leading gainers in the rally became among the bigger decliners in the correction, with Hyundai Heavy Industries Co. (009540.KS), the world's biggest shipbuilder, down 2.65 percent to 147,000 won after having hit a record on Tuesday.

Kookmin Bank 060000.KS fell 0.97 percent to 81,900 won. The country's biggest lender surged 10.4 percent in February as of the prior close, compared with the KOSPI's 5 percent gain.

But broader losses were prevented after POSCO rose to its latest record, with shares last up 1.14 percent at 354,000 won. The country's biggest steel maker announced on Tuesday it will buy back shares worth 889.3 billion won ($953.9 million).

POSCO shares have gained 13 percent so far this year as of the prior session, bolstered by solid quarterly results and expectations for more stable earnings this year than other sectors such as technology.

UBS raised its target price on the stock to 430,000 won, citing POSCO's attractive valuations versus global rivals, as well as its improving cost competitiveness, and rising Asian 2007 steel prices. ID:nSEO328263

Among other gainers, LG Electronics advanced 2.31 percent to 57,600 won on reports that the mobile phone maker has won a contest organized by the GSM Association to produce a low-cost handset for third-generation mobile phone networks. ID:nL06758341

($1=932.2 Won)