Seoul shares fall on inflation fear; techs firm

(Updates to mid-morning)

SEOUL, May 21 (Reuters) - Seoul shares retreated on Wednesday
after oil hit a new peak and a key U.S. inflation gauge rose more
than expected, pushing down Wall Street overnight and rekindling
worries about consumer spending.

Major South Korean exporters such as Hyundai Motor
(005380.KS) declined after U.S. producer prices excluding energy
and food rose at their fastest pace since 1991 in the year to
April, stoking fears that inflation will dampen consumer
sentiment in South Korea's second-largest export
market.[ID:nN20291072]

Hyundai Motor fell 1.84 percent to 85,500 won, and its
smaller affiliate Kia Motors (000270.KS) dropped 1.16 percent to
12,750 won.

The Korea Composite Stock Price Index was down 0.80 percent
to 1,858.21 points as of 0110 GMT, recovering slightly from a
1.29 percent fall in the opening, but still off 2.3 percent from
a new 2008 peak above 1,900 reached on Monday.

"Unless oil prices stabilise, the index will continue to be
under pressure and could fall below 1,800," said Sung Jin-kyung,
a market analyst at Daishin Securities.

"I would say $140 a barrel is a psychologically important
level that could deal the market a more extensive blow," Sung
added.

U.S. crude futures CLc1 settled at $129.07 a barrel after
hitting a high near $130 during the session on Tuesday.

However technology shares such as Samsung Electronics
(005930.KS) and LG Electronics (066570.KS) rebounded after three
consecutive losing sessions, with Samsung gaining 1.26 percent to
722,000 won and LG up 2.05 percent to 149,500 won.

LG Elec shares were further boosted by a local brokerage
report maintaining its target price on the No.4 handset maker at
200,000 won, on expectations the company will continue to perform
strongly thanks to its handset and appliances divisions.

"Despite the weakness in the U.S. market, sales from emerging
markets are still strong. Struggling rivals such as Sony Ericsson
and Motorola are helping South Korean handset makers expand their
global market shares," said Harrison Cho, an analyst at Mirae
Asset Securities.

Analysts said LG Elec's premium appliances business is also
set to report solid earnings on the year, but played down its
potential interest in GE's (GE.N) appliances arm, which GE
recently confirmed may soon be up for sale.

"There is little that LG can gain from the deal given
overlaps in the two businesses, especially with the price target
of $5 to $8 billion. I believe China's Haier has more to gain,"
Cho added.

Hynix Semiconductor (000660.KS) was also up 0.17 percent at
29,900 won.

(Reporting by Park Jung-youn; Editing by Jonathan Hopfner)