Seoul shares slip on earnings caution, banks rise

* KOSPI ends down 0.16 pct

* Banks rally as investors look to second half

* Smart grid technology issues up on G8 summit news
(Updates to close)

By Jungyoun Park

SEOUL, July 10 (Reuters) - Seoul shares fell on Friday as
sentiment grew more cautious ahead of the earnings season, with
some techs falling as investors moved to lock in profits on their
recent gains, but banks including KB Financial Group rose.

The Korea Composite Stock Price Index (KOSPI)
finished down 0.16 percent at 1,428.62 points.

"Markets were volatile as investors grew more cautious ahead
of the second quarter earnings season," said Kim Young-jun, a
market analyst at SK Securities.

Financials rose, with KB Financial Group (105560.KS), the
holding company of South Korea's biggest commercial lender
Kookmin Bank, rising 2.74 percent, and Shinhan Financial Group
(055550.KS) advancing 2.87 percent.

"With banks, investors are already looking ahead towards
third quarter numbers. Banking issues have been trading cheap,
below their book value, for months due to writedown worries,"
said Lee Hyeok-jae, an analyst at IBK Securities.

"But bad debt burdens are expected to ease from the third
quarter, and their earnings performance will improve," Lee added.

Separately, Credit Suisse maintained a "buy" rating on KB
Financial Group and kept its target price on the company
unchanged at 54,500 won.

Credit Suisse said that "we retain our preference of the (KB
Financial Group) stock as the top pick in the sector, as its
imminent negative news flow will provide investors with trading
chances, valuations are not demanding."

KB Financial Group shares ended at 46,950 won.

Meanwhile, retailers climbed after Shinsegae Co Ltd
(004170.KS) reported a 13.5 percent increase in second-quarter
operating profit from a year earlier on Thursday. Analysts said
other retailers were also expected to post strong earnings for
the April-June period and for the rest of the year.

"Department store sales in general seem to have passed the
bottom during the first quarter and consumer spending is expected
to improve for the latter half of the year," said Seo Jung-yeon,
an analyst at Shin Young Securities.

Lotte Shopping Co Ltd (023530.KS) gained 2.57 percent and
Hyundai Department Store Co (069960.KS) rose 2.77 percent.
Shinsegae climbed 0.77 percent.

AhnLab Inc (053800.KQ) spiked nearly 15 percent, gaining 60
percent on the week, amid fears of sustained hacker attacks.

"How long this rally will continue is directly correlated to
the scale of these attacks," said Lee Chang-young, an analyst at
Tong Yang Securities.

Elsewhere, smart grid-related issues rallied after the
Ministry of Knowledge Economy confirmed South Korea was picked at
the summit of G8 industrialised nations to spearhead efforts to
advance the efficient power delivery technology.

Omnisystem (057540.KQ) and Nuri Telecom (040160.KQ) spiked
nearly 15 percent each and LS Industrial System (010120.KS) rose
2.39 percent.

Memory chip makers declined after falls of 1 to 3 percent in
key DRAM chip prices, according to research firm DRAMeXchange.

Samsung Electronics (005930.KS), the world's No.1 memory chip
maker, lost 0.77 percent and Hynix Semiconductor (000660.KS), the
world's No.2, declined 4.19 percent.

Other key technology issues that had rallied earlier in the
week declined as investors moved to lock in profits.

LG Electronics (066570.KS), the world's No.3 handset maker,
fell 2.69 percent and LG Display (034220.KS) lost 1.45 percent.