Seoul shares tumble; credit worries hit banks

(Updates to mid-morning)

By Park Jung-youn

SEOUL, July 15 (Reuters) - Seoul shares extended losses to
fall 2 percent on Tuesday, with financials tumbling after U.S.
banks dropped overnight on fears of further fallout from the
credit crisis while high oil prices also hurt market sentiment.

The Korea Composite Stock Price Index was down 2.10
percent to 1,525.89 points as of 0129 GMT.

Foreign investors offloaded 72 billion won ($72.07 million)
worth of Seoul shares as of 0040 GMT, heading for a 27th selling
session, the longest foreign selling streak in history. They have
sold 7.4 trillion won worth of shares since June 5.

"The foreign selloff will probably continue until U.S. stock
and financial markets stabilise, until investors feel more
comfortable about investing in Asian stocks again," said Kim
Seong-joo, a market analyst at Daewoo Securities.

"South Korea's market is one of the most liquid markets in
the region and it is therefore easier to procure cash from South
Korean stocks. For now, foreign investors are holding on to cash
as they become risk averse amid shaky market conditions," Kim
added.

Financials such as Kookmin Bank 060000.KS and Shinhan
Financial Group (055550.KS) dropped after shares in U.S. regional
banks fell on fresh worries about the sector's health after
regulators seized mortgage lender IndyMac Bancorp Inc IMB.N
late Friday, following withdrawals by clients.

Kookmin Bank lost 2.76 percent to 56,400 won and Woori
Finance Holdings (053000.KS) fell 3.24 percent to 14,950 won.
Hana Financial Group (086790.KS) slid 4.54 percent to 35,750 won.

Energy-price sensitive airlines and automakers, such as
Korean Air Line (003490.KS) and Hyundai Motor (005380.KS) also
struggled as oil prices settled strong above $145 a barrel on
Monday.

Korean Air Line went down 2.7 percent to 41,400 won and
Hyundai Motor declined 3.69 percent to 67,800 won.

Shares in tech issues such as LG Electronics (066570.KS)
turned lower as the sectoral outlook grows increasingly grim amid
mounting inflationary pressure and cooling consumer sentiment.

Analysts said LG Elec's earnings will likely peak out in the
second quarter to weaken in the second half of the year.

"Earnings momentum is set to slow down from the third quarter
this year as handset market competition intensifies, the while
household appliance sector faces slow seasons in the second
half," said Kim Ik-sang, an analyst at CJ Investment &
Securities.

LG Elec lost 3.56 percent to 108,500 won, and LG Display
(034220.KS) went 4.45 percent lower to 31,150 won.