Seoul shares down; banks tumble on liquidity fears

*KOSPI slides 5.3 percent

*Banks lead losses as liquidity concerns deepen

*LG Display drops after agreeing to pay U.S. fines

(Updates to midmorning)

By Park Jung-youn

SEOUL, Nov 13 (Reuters) - Seoul shares traded sharply lower
on Thursday after a slump overnight on Wall Street, with
technology issues under pressure on deepening concerns about
corporate profits and banks hit by liquidity worries.

The Korea Composite Stock Price Index was down 5.33
percent at 1,063.86 points as of 0225 GMT, headed for a third
consecutive losing session. It has lost 7.7 percent since Monday.

But the index is still up 19 percent from its Oct 27 low of
892.16 points.

"The sectors in the spotlight, in a very negative way, are
banks and construction issues, and they are a big drag on the
overall index," said So Jang-ho, a market analyst at Samsung
Securities.

"Shares will trade weak until the real economy hits a bottom,
which we estimate will be around the first half of 2009," So
added.

Bank shares tumbled on Thursday on worries about further
deterioration in the domestic construction sector, and after the
U.S. Treasury backed away from using a $700 billion bailout fund
to cleanse bank balance sheets of bad mortgage debt, choosing to
focus instead on buying stakes in banks to encourage them to
increase lending. [ID:nN12267400]

"In the short term, the U.S. treasury's change of stance may
be negative to the markets as it raises doubts, but in the long
term it will help," said Lee Kyung-su, a market analyst at Taurus
Investment & Securities.

"But concerns about a severe downturn in the domestic
construction sector still weigh on banks ... there could be
scores of cases like Shinsung," Lee added.

Shinsung Engineering & Construction 001970.KS, a medium
sized builder, on Wednesday said it had sought court protection
to avoid bankruptcy, stoking worries about the financial health
of builders, to which local banks lend heavily.

Shares in Hana Financial Group (086790.KS) dropped 14.9
percent and Woori Finance Holdings (053000.KS) plunged 14.15
percent.

Construction issues also fell across the board, with Daewoo
Engineering & Construction (047040.KS) down 11.24 percent and
Samsung Engineering (028050.KS) losing 9.87 percent.

Shares in LG Display (034220.KS) tumbled 12.6 percent after
the company agreed to plead guilty and pay $400 million in fines
for price fixing of flat screens in the United States.

Other technology issues including Samsung Electronics
(005930.KS) and Hynix Semiconductor (000660.KS) retreated after
U.S. chip giant Intel Corp (INTC.O) on Wednesday issued a warning
about its fourth quarter revenue.[ID:nN12312939]

Samsung Elec, the world's No.1 memory chip maker, lost 3.54
percent and Hynix Semiconductor (000660.KS), the No.2, shed 3.81
percent.

But some defensive issues outperformed the index.

"Pharmarceuticals and telecommunication issues are very good
defensive picks during a severe market downturn like this one.
They have steady revenue streams," said Lim Dong-min, a market
analyst at Dongbu Securities.

Yuhan Corp, South Korea's leading pharmarceutical company,
widely outperformed the broader markets Thursday, extending its
rally after being added to the MSCI Emerging Markets stock index
.MSCIEF. [ID:nN11650709]

Shares in Yuhan were up 2.23 percent.

Mobile operator KTF (032390.KS) was down 1.67 percent.

(Editing by Jonathan Hopfner)