Seoul shares dip on oil, Lone Star ruling eyed

(Updates to mid-morning)

By Park Jung-youn

SEOUL, June 24 (Reuters) - Seoul shares extended falls on
Tuesday, with airlines and tour operators hit by high oil prices
while investors awaited a local court ruling on U.S.-based Lone
Star expected to have major implications for the financial sector.

Shares in Korea Exchange Bank (004940.KS) struggled ahead of
a high court ruling Tuesday on alleged stock manipulation by its
majority shareholder, private equity house Lone Star, and the
head of its South Korean operations.

Analysts were skeptical of investor worries that Lone Star
may resort to selling off KEB shares in block sales if the ruling
scuttles a current deal with HSBC (HSBA.L).

"I think it is highly unlikely for Lone Star to sell the
shares in block deals. That would mean steep discounts to the
current share price, and why would they do that when there are
banks interested in pursuing KEB?" said Choi Chung-uk, an analyst
at Daishin Securities.

KEB fell 1.39 percent to 14,200 won.

The Korea Composite Stock Price Index was down
0.35 percent to 1,709.56 points as of 0058 GMT, trading at a
12-week low.

"Investors are holding back ahead of the U.S. (Federal Open
Market Committee interest rate) meeting, as they are keen on
hearing the Fed's comments on the economy and any hints about its
future stance," said Bae Sung-young, a market analyst at Hyundai
Securities.

"What the market needs (for a rebound) is some sort of
positive outlook from the Fed, but we'll see about that. The
index will hover at around 1,700 for some time," Bae added.

Shares sensitive to energy prices such as Korean Air Line
(003490.KS) and Asiana Airlines (020560.KS) retreated after U.S.
crude CLc1 rose to settle near $137 a barrel overnight on
supply worries despite Saudi Arabia's pledge to raise output.

Korean Air fell 1.29 percent to 53,400 won and Asiana
Airlines lost 0.52 percent to 5,740 won.

Shares in travel agencies plunged on worries that mounting
inflationary pressure and the weaker won currency may dampen
demand for tour packages, which have also gotten more costly
lately on the back of higher fuel costs.

Hana Tour (039130.KQ) lost 8.44 percent to 36,350 won and
Mode Tour (080160.KQ) fell 7.26 percent to 23,000 won.

Financials such as Woori Finance Holdings (053000.KS) and
Hana Financial Group (086790.KS) came under pressure after their
U.S. peers fell across the board on Monday on views that credit
conditions may deteriorate further.

Woori Finance fell 1.15 percent to 17,200 won and Hana
Financial Group lost 0.75 percent to 39,900 won.

STX Shipbuilding (067250.KS) outperformed the market, rising
0.16 percent to 31,900 won after news overnight that it would
make a takeover offer for Norway's Aker Yards AKY.OL after
raising its stake in Europe's biggest ship maker above a key
threshhold. [ID:nL23491762]

South Korean steelmakers dropped across the board after news
that China's largest steelmaker Baosteel (600019.SS) and Rio
Tinto (RIO.L) had agreed on the highest iron ore price hike in
over a decade [ID:nSYD121802]

POSCO (005490.KS) lost 1.67 percent to 530,000 won and
Hyundai Steel (004020.KS) dropped 1.54 percent to 76,900 won on
worries that South Korean steel makers may also have to contend
with rising raw material prices, though analysts said their
impact could be limited.

"I think steelmakers will be able to pass on the costs quite
effectively. POSCO is said to be ready to raise the prices of its
steel products for domestic clients very soon," said Kim
Gyung-jung, an analyst at Samsung Securities.