Seoul shares inch higher; techs, banks gain

*Shipbuilders continue to retreat on demand worries

*Airlines rally after oil price falls

*Banks rebound following losses

(Updates to midmorning)

SEOUL, Aug 5 (Reuters) - Seoul shares traded slightly higher
on Tuesday after opening lower on persistent worries about the
economy, helped by gains in tech and banking issues after their
latest steep losses.

The Korea Composite Stock Price Index was up 0.76
percent at 1,554.47 points as of 0039 GMT.

"Shares are making some recovery after yesterday's steep
falls, with large market cap issues such as tech and banking
shares regaining. But this has little to do with fundamental
improvements," said Choi Seong-lak, a market analyst at SK
Securities.

"Probably the only reason for some buying activity is that
shares have gotten cheap," Choi added.

Shipbuilders continued their downward run on the back of
demand fears as economies slow down, with order cancellations and
higher steel prices denting profits.

Shares in Hyundai Heavy Industries (009540.KS) dipped 0.73
percent to 273,500 won and Samsung Heavy Industries (010140.KS)
was down 1.83 percent to 34,850 won. Hyundai Mipo Dockyard
(010620.KS) sank 1.9 percent to 181,000 won.

Other industrial issues such as steelmakers also retreated on
demand worries. POSCO (005490.KS), the world's No.4 steel maker,
fell 3.41 percent to 495,500 won and Hyundai Steel (004020.KS)
lost 3.17 percent to 64,200 won.

However transporters such as Korean Air Line (003490.KS) and
Asiana Airlines (020560.KS) rose after U.S. crude CLc1 fell to
around $121 a barrel.

Korean Air gained 3.73 percent to 43,100 won and Asiana
Airlines went up 2.0 percent to 4,600 won.

Financials also rebounded after their latest losing streak,
with Kookmin Bank 060000.KS rising 2.94 percent to 59,500 won
and Shinhan Financial Group (055550.KS) climbing 3.26 percent to
47,550 won.

Hanarotelecom (033630.KQ) fell 0.27 percent to 2,460 won
after South Korea's second-largest broadband service provider
reported quarterly losses on Tuesday.

Meanwhile Kia Motors (000270.KS) continued to rally for a
second day after releasing strong July sales figures late on
Friday, climbing 1.18 percent to 12,850 won. Hyundai Motor
(005380.KS), its bigger affiliate, gained 0.29 percent to 69,200
won, underperforming the broader market after reporting a weak
set of sales numbers.