Seoul shares up but econ worry lurks as banks fall

*KOSPI up extending record 12 percent jump on Thursday

*Banks' falls drag on shares

*Industrials gain on relative won stability

(Updates to midmorning)

By Park Jung-youn

SEOUL, Oct 31 (Reuters) - Seoul shares extended the previous
session's record 12 percent jump on Friday after Wall Street rose
overnight on hope global interest rate cuts would help cushion an
economic downturn, but banks' falls dragged on the main index.

KB Financial Group (105560.KS) dropped 7.57 percent after its
quarterly results came out weaker than expected after Thursday's
close, knocking other banks on concerns that the impact from
October's global financial turmoil and a long-running world wide
credit crunch will be felt keenly in domestic trading results.

The Korea Composite Stock Price Index was up 0.96
percent at 1,095.09 points as of 0125 GMT, after losing more than
2 percent earlier in the early morning session.

The index is now up 16.2 percent on the week but down 25
percent on the month as nerves settle slowly at the end of an
October which has seen waves of global interest rate cuts and
billions of dollars of rescue funds to unlock a credit freeze
which threatens to provoke recession around the world.

"After yesterday's record daily gains, shares are making
modest gains as banking issues continue to pressure the index
because investors are increasingly convinced that banks are set
to report more writedowns in the next quarters," said Lim
Tae-geun, a market analyst at Daewoo Securities.

HEAVY VOLUME

Trading volume was heavy during the morning at 336 billion
shares hours compared to the Sept daily average trading volume of
393.6 million shares.

The Korea Exchange temporarily suspended programme buying
orders on the main board for five minutes from 0021 GMT due to
volatile futures prices.

Among the banks Woori Finance Holdings (053000.KS) fell 5.02
percent. Shinhan Financial Group (055550.KS) and Hana Financial
(086790.KS) fell 1.36 percent and 0.24 percent respectively,
awaiting quarterly results after the close.

However relative stabilisation in the won currency KRW=
following the currency swap deal with the U.S. announced on
Thursday, continued to lift industrials, which underwent deep
losses during early October's market freefall.

The won has gained more than 10 percent on the week.

"Even considering the weak market environment, their losses
had been too big," Lim said.

World No.4 steelmaker POSCO (005490.KS) extended Thursday's
near 15 percent gain by another 2.41 percent, while Hyundai Steel
(004020.KS) went 8.78 percent higher.

Shipbuilders rose after their massive falls on the month. The
transportation equipment subindex .KS42 had fallen 43 percent
since late September compared to the KOSPI's 35 percent drop.

Daewoo Shipbuilding & Marine Engineering (042660.KS) was up
14.98 percent and Samsung Heavy (010140.KS) traded 13.61 percent
higher. Hyundai Heavy Industries (009540.KS), the world's largest
shipbuilder, was up 6.98 percent, but was underperforming its
peers as third quarter results after Thursday's close came out
weaker than the market consensus.

But some of South Korea's exporter blue chips also fell after
many of them rose near the upper daily trading limit of 15
percent on Thursday. Hyundai Motor (005380.KS) was down 3.16
percent and Samsung Electronics (005930.KS) was down 2.79 percent.

(Editing by Keiron Henderson)