Seoul stocks edge down, weighed by credit worries

(Updates to mid-morning)

SEOUL, March 4 (Reuters) - Seoul stocks fell slightly by mid-morning on Tuesday, erasing initial gains, as worries over the global credit squeeze hit banks and brokers, offsetting strength in shipping firms such as Korea Line (005880.KS: Quote, Profile, Research, Stock Buzz).

LG Chem (051910.KS: Quote, Profile, Research, Stock Buzz), South Korea's second-biggest battery maker, fell after production at one of its battery plants was halted following a fire on Monday evening [ID:nSP209946]. Rival Samsung SDI (006400.KS: Quote, Profile, Research, Stock Buzz) rose on the news.

Dominant fixed-line carrier KT Corp (030200.KS: Quote, Profile, Research, Stock Buzz) benefitted from continued defensive plays against economic woes, extending Monday's gains to rise by 2.63 percent to 48,750 won.

The Korea Composite Stock Price Index was down 0.18 percent at 1,668.72 points by 0125 GMT. The index rose as much as 0.89 percent earlier in the session.

"The KOSPI will likely be seesawing all day," said Oh Hyun-seok, an analyst at Samsung Securities. "Whenever there's news of fresh bad debt and asset problems, concerns of the credit crunch return and hurt equities."

Financial companies remained under pressure after U.S. peers took a beating on Monday due to a cash squeeze at a high profile mortgage lender, Thornburg Mortgage Inc (TMA.N: Quote, Profile, Research, Stock Buzz).

Shinhan Financial Group (055550.KS: Quote, Profile, Research, Stock Buzz) fell 1.78 percent to 49,800 won and Mirae Asset Securities (037620.KS: Quote, Profile, Research, Stock Buzz) declined 1.89 percent to 129,500 won. Credit card issuer Samsung Card (029780.KS: Quote, Profile, Research, Stock Buzz) slid 2.02 percent to 48,600 won.

Shipping companies rose on the back of the recent increase in freight rates and expectations that higher commodity prices should lead to more shipping demand.