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Friday September 14, 2:47 PM Seoul shares gain on shipbuilders; POSCO hits high SEOUL, Sept 14 (Reuters) - Seoul shares rose 1.2 percent on Friday, marking a second day of gains, as POSCO hit a record amid expectations for higher steel prices, while shipbuilders such as Daewoo rallied as they continue to win new orders. But fuel-sensitive stocks such as Korean Air Co fell after oil prices hit a record, while lenders such as Kookmin Bank retreated on worries about loan exposure to financially troubled small and medium-sized builders. Chip makers such as Samsung Electronics Co Ltd also extended a recent slump amid worries a drop in DRAM memory chip prices will hit earnings starting in the fourth quarter. "Investors are focusing on the sectors that are going to be the market leaders until the rest of the year, primarily steel, chemicals and shipbuilders," said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities. The benchmark Korea Composite Stock Price Index (KOSPI) gained 1.2 percent to end at 1,870.02 points. The KOSPI fell 0.8 percent for the week, marking its first weekly fall in four, in a cautious and volatile lead-up to the Federal Reserve's meeting on Tuesday, which is widely expected to result in a U.S. interest rate cut. Still, the main index is up 14.9 percent since hitting a three-month intraday low on Aug. 17 and up 30.4 percent for the year, even if that is still well below the record 2,015.48 points hit on July 26. Investors are bracing for what could be a crucial next week, with the Federal Reserve holding a policy meeting on Tuesday amid widespread expectations for a cut in U.S. interest rates, though there's debate about the size of the move. But even the Fed's decision could be trumped by a decision by index compiler FTSE on Thursday about whether to upgrade South Korea to developed market status. Trading rooms have been buzzing with speculation that the country will indeed be raised from its current advanced emerging designation, with investors hoping the move will spark a rally on the back of expectations for increased foreign buying. STEEL AND SHIPS POSCO Co Ltd surged to a record 614,000 won, though ending the session up 3.9 percent at 612,000 won, as investors expect stronger global demand to bolster steel prices. Steel makers have faced a volatile week, with the sector at first facing fears that China will raise interest rates -- which would dent a boom in global trade for commodities -- but with confidence returning later in the week. Dongkuk Steel Co and Hyundai Steel Co announced steel price increases in some products this week, helping bolster optimism. Daewoo Shipbuilding and Marine Engineering Co advanced 2.8 percent to 55,500 won after announcing it had secured a combined $740 million order to build a drill ship and a crude oil carrier. [ID:nSEO108681] PLENTY OF DECLINERS Shares dependent on fuel fell this week as U.S. crude futures surged, culminating in a record above $80 a barrel overnight. Carrier Korean Air ended down 3.1 percent at 60,100 won on Friday. Banks were unable to shake off a recent slump, with the sector hit hard by worries about tighter global credit and loan exposure to a financially struggling small and mid-sized construction sector. Kookmin Bank, the country's biggest lender, lost 1.4 percent to 72,500 won, bringing its loss for the year to 3.2 percent. Chip makers also continued a recent slide amid worries earnings will worsen after peaking in the current quarter, with Goldman Sachs and UBS this week downgrading their price targets and earnings on the stock. Samsung Electronics lost 1.1 percent to 556,000 won. Shares in the world's biggest memory chip maker are now down 9.3 percent for the year. Hynix Semiconductor Inc fell 0.3 percent to 30,400 won, bringing its loss so far in 2007 to 16.6 percent. Separately, the chip maker said it expects its 2007 sales in Greater China to grow at least 15 percent. [ID:nSHA348913]