Seoul shares dip on economy worry after bailout OK

* KOSPI down 1.5 pct

* Markets turn lower after the senate's bailout decision

* Economic worries weigh on exporters

(Updates to midday)

By Park Jung-youn

SEOUL, Oct 2 (Reuters) - Seoul shares were lower by midday on
Thursday after the U.S. senate, as expected, approved a massive
bailout of the financial industry, with economic worries
outweighing rescue relief and sending key exporter shares down.

The Korea Composite Stock Price Index was down 1.49
percent at 1,418.05 points as of 0250 GMT, down from the
session's initial high of 1,458.68 points.

The rescue bill is aimed at stimulating global credit markets
and interbank lending that had stalled while financial
institutions grapple with piles of failed mortgages.

However Seoul analysts said while the plan's approval was a
relief, it still does not completely resolve financial and
economic problems that have put markets under distress.

"It does not solve the fundamental problems, such as the
serious downturn in the economies, which will likely last for
another year or more. Moreover we do not know the exact size of
the assets that have gone bad," said Jang Huh, a managing
director at Prudential Asset Management.

"The rescue plan is literally an emergency measure and it
remains to be seen how effective it's going to be in addressing
the issues abounding in today's markets," he added.

Analysts also said persistent volatility in South Korean
foreign exchange markets also heightened widespread uncertainties
about corporate earnings and the health of the economy.

Some exporters turned lower as the session progressed,
responding belatedly to weak U.S. factory data and private sector
employment figures published overnight.[ID:nN01504188]

Samsung Electronics (005930.KS), the world's No.1 memory chip
maker, fell 1.88 percent, and Hynix Semiconductor (000660.KS)
lost 2.06 percent.

South Korean auto makers also shed their earlier firm gains
to trade downward, with Hyundai Motor (005380.KS) down 0.41
percent and Ssangyong Motor 0003620.KS down 0.4 percent.

Heavy industry issues in steel-making and shipbuilding
sectors fell across the board. POSCO (005490.KS), the world's
No.4 steelmaker dropped 3.78 percent, and Hyundai Heavy
Industries (009540.KS), the world's No.1 shipbuilder fell 3.45
percent, on worries about demand in heavy industrial goods.

Meanwhile shares in Daewoo Shipbuilding & Marine Engineering
(042660.KS) came under further pressure after local media
reported that the National Pension Service had decided not to
take part in bidding for the South Korean shipbuilder.

Daewoo Shipbuilding dropped 3.55 percent.

(Editing by Keiron Henderson)