Seoul shares up as foreign holdings hit record low

*Exporters rise on easier oil, U.S. data

*Financials rally after Merrill share sale

*Foreign shareholding languishes at historical low

(Updates to midmorning)

SEOUL, July 30 (Reuters) - Seoul shares traded higher on
Wednesday, led by exporters after oil prices fell and U.S. stocks
rebounded on positive economic indicators, but the market notched
up a grim milestone with foreign investment hitting a new low.

The Korea Composite Stock Price Index was up 0.80
percent at 1,579.75 points as of 0119 GMT.

"The market is still far too volatile, making substantial
gains one day and just as many losses the very next ... what we
are seeing today is something of a technical, relief-induced
rebound, which may not last," said Kim Joong-hyun, a market
analyst at Goodmorning Shinhan Securities.

Foreign investors were net sellers of 44.6 billion won
($44.42 million) worth of Seoul shares as of 0111 GMT, further
contributing to a selloff in recent weeks that has cut the
foreign stake in the main Seoul exchange to below 30 percent in
terms of market capitalisation, the lowest since the Korea
Exchange first started calculating foreign ownership in January,
2001.

Most of the damage was done in a record selling streak that
began June 5 and lasted over 30 sessions. Foreign investors have
dumped 9.5 trillion won since that date.

Financials rallied after Merrill Lynch's MER.N latest
write-down and share sale hinted at a possible turning point in
credit crisis, improving sentiment towards financials in the
South Korean market.

However analysts cautioned against over-optimism.

"It's good that Merrill has come clean with its bad debts and
raised capital successfully, but one also has to keep in mind
that the bank was badly in need of that additional capital and
that it came at the cost of a significant share price dilution.
U.S. banks are in very fragile condition," said Kim of
Goodmorning Shinhan Securities.

Kookmin Bank 060000.KS rose 3.24 percent to 57,300 won and
Shinhan Financial Group (055550.KS) gained 2.41 percent to 46,800
won. Woori Finance Holdings (053000.KS) also went up 1.4 percent
to 14,500 won.

Brokerages joined the rally, with Samsung Securities
(016360.KS) climbing 3.05 percent to 64,100 won and Woori
Investment & Securities (005940.KS) gaining 3.09 percent to
20,000 won.

Exporters were helped by data pointing to a slowing decline
in U.S home prices and gradually improving consumer sentiment,
with Samsung Electronics (005930.KS) up 2.39 percent to 557,000
won and Hyundai Motor (005380.KS) rising 2.6 percent to 71,000
won.

LG Electronics (066570.KS), the world's No.4 handset maker,
also rebounded after steep losses in the previous session, rising
1.97 percent to 103,500 won, while Hynix Semiconductor
(000660.KS), the world's No.2 memory chip maker, was up 0.69
percent to 21,950 won.

Steelmakers also rose across the board after American peer
U.S. Steel Corp (X.N) posted forecast-beating record quarterly
profits and indicated better results were ahead, boosting its
shares by 16 percent on Tuesday.

POSCO (005490.KS) rose 3.98 percent to 522,000 won and
Hyundai Steel (004020.KS) went up 2.85 percent to 68,500 won.
Dongkuk Steel (001230.KS) gained 3.57 percent to 47,850 won.

Shares in auto parts maker Hyundai Mobis (012330.KS) rose
3.37 percent to 89,000 won after it reported
stronger-than-expected earnings on Tuesday.

"(Its) solid quarterly earnings and solid second half outlook
make it an attractive share to own," said Cho Soo-hong, an
analyst at Hyundai Securities.