Seoul shares shrug off talk North's Kim is dead

(Updates to noon)

SEOUL, May 29 (Reuters) - Seoul shares on Thursday shrugged
off talk in domestic and overseas share markets that North Korean
leader Kim Jong-il had died, with the main index up nearly 2
percent after a favourable U.S. economic report.
By 0221 GMT the Korea Composite Stock Price Index was up 1.8
percent at 1,837.96 points, with techs such as Samsung
Electronics (005930.KS) leading the way after gauge of U.S.
business investment posted a surprise jump.

That pointed to a positive environment for tech and auto
firms looking to sell into South Korea's second biggest export
market and outweighed the talk of Kim's death, which analysts
said would likely push the market sharply lower.

"Kim's death would add further uncertainties to South Korea's
existing geopolitical risks, as there is no way knowing how the
North will proceed with the power shift," said Park Sang-hyun, a
chief economist at CJ Investment & Securities.

"(Kim's death) will not immediately free the North from
communism. In fact the relationship with the South could even
worsen as it grapples with the loss of its leader," Park added.

A little-known South Korean online news site reported Kim
Jong-il had been assassinated, quoting a highly placed Chinese
security official.

South Korea's National Intelligence Service said it had no
information to substantiate the report and was making further
checks.

North Korea's official media has had numerous reports this
week of Kim out in public for inspection tours and South Korea's
spy agency earlier this week denied a previous round of rumours
of Kim's death.

The report helped boost shares in Japan where investors
interpreted the reported death of Kim as reducing geopolitical
risks on the Korean peninsula.

Despite the dominant view in South Korea that Kim's death
will likely be negative, some said it could be a positive
development in the long-run.

"His death could lead to the dismantling of the communist
state. Sure, there will be financial costs the South may have to
bear, but the long-existing risks of being a neighbour to a wary,
communist state will at least be removed," said Shim Jae-youb, a
market analyst at Meritz Securities.

Shares in Samsung Electronics (005930.KS), the No.1 memory
chip maker, rose 3.32 percent to 715,000 won, boosted by Nomura's
decision to upgrade its rating on the stock from "neutral" to
"buy" on improving DRAM fundamentals and favourable forex rates.

Other technology issues such as LG Electronics (066570.KS)
and Hynix Semiconductor (000660.KS) also rose, with LG Elec up
4.48 percent to 140,000 won and Hynix up 1.53 percent to 29,900
won.

(Additional reporting by Aiko Hayashi in Tokyo)

(Reporting by Park Jung-youn; editing by Keiron Henderson;
jungyoun.park@reuters.com; +82 2 3704 5643; Reuters Messaging:
jungyoun.park.reuters.com@reuters.net))