Seoul stocks fall 0.8 pct on financials, oil

(Updates to mid-morning)

SEOUL, Dec 27 (Reuters) - Seoul stocks fell 0.8 percent on
Thursday, as higher oil prices hurt fuel cost-sensitive firms
such as Korea Electric Power Corp, while investors locked in
recent strong gains in financials such as Kookmin Bank.

The fall was also triggered by reduced institutional demand
for shares after Wednesday marked the last trading day of the
year that entitled buyers to year-end dividend payments.

"It's a burden that oil prices resumed a rally, but markets
are not likely to move much in the rest of the year," said Sung
Jin-kyung, an analyst at Daishin Securities.

"The first quarter of next year could be volatile amid
worries about global credit markets, but I expect the U.S.
economy to head for a soft landing and China's economy to
maintain strong growth, boosting markets from the second
quarter."

The Korea Composite Stock Price Index (KOSPI) fell
0.8 percent to 1,891.42 points as of 0042 GMT.

Companies heavily dependent on fuel fell after oil jumped 2
percent on an expected drop in U.S. stockpiles, with state-run
power provider Korea Electric Power Corp (015760.KS: Quote, Profile, Research, Stock Buzz) slipping
3.61 percent to 40,000 won.

Korean Air Co (003490.KS: Quote, Profile, Research, Stock Buzz), South Korea's top airline, slipped
0.41 percent to 73,000 won.

Banks fell across the board, giving up part of their recent
strong gains that had been driven by hopes that a pro-market
government under president-elect Lee Myung-bak would scrap a rule
prohibiting conglomerates from owning domestic banks and
deregulate the financial sector.

"It would be hard to expect an additional rally in financial
shares for the time being, because Lee's policy pledges won't
materialise in the short term," said Lee Jun-jae, an analyst at
Korea Investment & Securities.

Kookmin Bank (060000.KS: Quote, Profile, Research, Stock Buzz), South Korea's top lender, fell 3.47
percent to 69,500 won, and second-ranked Shinhan Financial Group
(055550.KS: Quote, Profile, Research, Stock Buzz) declined 2.89 percent to 53,800 won.

Hana Financial Group (086790.KS: Quote, Profile, Research, Stock Buzz) shed 3.38 percent to 49,950
won.

But Hyundai Steel (004020.KS: Quote, Profile, Research, Stock Buzz), South Korea's second-largest
steel maker, rose 2.11 percent to 77,600 won after it said late
on Wednesday it will raise some steel products prices by up to 7
percent, reflecting soaring raw material prices. [ID:nSEO219899]
(Reporting by Kim Soyoung; Editing by Sei Chong)