Seoul shares drop 2 pct as U.S. crisis outweighs upgrade

* Korea Composite Stock Price Index down 2.31 percent

* FTSE upgrade to developed status ignored amid U.S. worries

* Higher oil sends airlines lower

(Updates to midmorning)

By Park Jung-youn

SEOUL, Sept 18 (Reuters) - Seoul shares fell over 2 percent
on Thursday morning amid a global financial crisis, ignoring
confirmation that South Korea has been upgraded to "developed
market" status by the FTSE Group.

The UK global index provider said on Thursday it had upgraded
Asia's fourth-largest economy to "developed" from "advanced
emerging" status. [ID:nSEL000259]

The Korea Composite Stock Price Index was down 2.31 percent
at 1,392.36 points at 0057 GMT.

"The FTSE upgrade news is positive, but the U.S. financial
market fears outweighed the news," said Kim Seung-han, a market
analyst at CJ Investment & Securities.

"The U.S. government was selective in letting one financial
institution die while extending a lifeline to another. There are
real doubts about U.S. banks' survival."

Financials fell across the board with Kookmin Bank
060000.KS losing 5.87 percent and Shinhan Financial Group
shedding 6.02 percent.

Shares sensitive to energy prices fared badly after U.S.
crude CLc1 jumped to end above $97 a barrel on Wednesday. Oil
was trading nearly 1 percent higher at $97.94 per barrel as of
0104 GMT.

Korean Air Line (003490.KS) dropped 3.73 percent and Asiana
Airlines (020560.KS) lost 2.67 percent.

Technology issues also traded lower as worries about
technology spending continued, with Samsung Electronics
(005930.KS), the world's No.1 memory chip maker, down 3.05
percent, and Hynix Semiconductor (000660.KS) down 3.27 percent.

Shares in LG Chem (051910.KS) outperformed against the
broader market after a unit of LG Chem said it was confident its
next-generation lithium-ion batteries would meet the requirements
of General Motors Corp's (GM.N) all-electric Chevrolet Volt
plug-in car. [ID:nN17189231]

LG Chem was trading 1.25 percent higher.

(Editing by Nick Macfie)