* KOSPI erases early gains on profit-taking
* Foreign net buying underpins main index
* Samsung SDI, Cheil Industries jump on merger deal
SEOUL, March 31 (Reuters) - Seoul shares were nearly flat after hitting their highest level in almost three months on Monday, as profit-taking by some investors offset a boost from hopes that China would take steps to stimulate its economy.
The Korea Composite Stock Price Index (KOSPI) was up 0.01 percent at 1,981.26 points as of 0202 GMT after hitting an intraday high of 1,989.80, its strongest level since Jan. 2.
At its current level, the KOSPI would eke out a 0.1 percent gain for the month.
Investors took heart from comments by Chinese Premier Li Keqiang on Friday that Beijing is ready to support its cooling economy, saying it had the necessary policies in place and would push ahead with infrastructure investment.
Samsung Securities analyst Kim Yong-goo, however, said: “It’s difficult for the market to solely move on talks about stimulus with no concrete plan to back them up.”
Kim added that the local market could price in hopes of stimulus steps from China and the euro zone, but a major rise will be hampered until investors shake off doubts about first-quarter corporate earnings in the coming weeks.
Foreign investors purchased a net 82.2 billion won ($77 million) worth of KOSPI shares by midsession, headed for a fourth straight session of net buying.
Samsung SDI Co Ltd jumped 6.6 percent and its electronics materials affiliate Cheil Industries Inc climbed 5.5 percent, after Samsung SDI announced before the open that it would acquire Cheil through a share swap.
SDI will offer Cheil shareholders 0.44 SDI share for each Cheil share they own and the new company will have annual sales of around 10 trillion won ($9.4 billion).
Dongbu Steel Co Ltd plunged 9.1 percent as investors locked in profits following a 25 percent jump over the previous two sessions, after media reports said that steelmaker POSCO may consider buying some steel and energy assets of the company.
Decliners outnumbered advancers 426 to 326.
The tech-heavy junior KOSDAQ edged down 0.3 percent. ($1 = 1069.3000 Korean Won) (Reporting by Jungmin Jang; Editing by Chris Gallagher)