Seoul shares fall but builders gain as vote nears

(Updates to mid-morning)

SEOUL, Dec 17 (Reuters) - Seoul shares fell 0.9 percent on
Monday, led by exporters such as Samsung Electronics, on worries
that surging U.S. inflation would prevent further interest rate
cuts in South Korea's No.2 export market.

But construction shares outperformed, on expectations that
the Dec. 19 presidential election will see pro-business candidate
Lee Myung-bak as the winner, sparking big public projects.

"On top of the consumption and subprime troubles in the
United States, yet another headache, worry over inflation, has
emerged," said Lee Sun-yeop, an analyst at Goodmorning Shinhan
Securities.

"But the market has momentum to gain this week as investors
are growing optimistic the successful presidential candidate
would make reviving the economy the top priority."

The Korea Composite Stock Price Index fell 0.87
percent to 1,878.47 points as of 0104 GMT, falling further from a
two-week closing low on Friday.

U.S. stocks swooned on Friday on concerns that surging
inflation may prevent the Federal Reserve from lowering interest
rates enough to pull the economy out of the grip of a housing and
credit crisis.

Exporters took a hit from the Wall Street performance, with
the world's top memory chip maker Samsung Electronics Co Ltd
(005930.KS) falling 1.55 percent to 572,000 won.

POSCO Co Ltd (005490.KS), the world's fourth-largest steel
maker, shed 2.04 percent to 577,000 won after saying late on
Friday it started in early December to reduce monthly stainless
steel output by 20 percent, responding to slower demand.
[ID:nSEO150773]

But the construction sector beat the wider market amid
expectations the widely expected election of Lee would boost
major construction projects, especially because he has pledged to
build a canal across the nation.

Daewoo Engineering & Construction (047040.KS) gained 0.76
percent to 26,650 won and Doosan Engineering & Construction
(011160.KS) advanced 0.99 percent to 15,350 won.

(Reporting by Kim Soyoung; Editing by Sei Chong)