Seoul shares hit 7-1/2-mth closing high on techs

* KOSPI rises 2.99 pct

* LG Innotek, Micron end flat as merger looms

* Hynix rises on strengthening outlook hopes

SEOUL, May 19 - Seoul shares posted a 7-1/2-month closing high on Tuesday as techs advanced on renewed economic hopes, while a stronger won <KRW=> boosted steelmakers and banks including KB Financial Group <105560.KS>.

The Korea Composite Stock Price Index <.KS11> (KOSPI) gained 2.99 percent to 1,428.21 points, the highest close since early October.

"Sentiment has turned positive following solid gains and positive data from the United States. Foreign investors' continued buying helped sentiment," said Lim Nara, a market analyst at Hanwha Securities.

U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end. [ID:nWEQ001011]

"It is true that the main index has risen quite steeply over a short period, but we think the current momentum will likely continue through this week," Lim added.

Shares in Hynix Semiconductor <000660.KS> jumped 8.58 percent on a strengthening memory chip sector outlook and a positive brokerage note from Citi.

"The DRAM market's bottom seems to be near (and) news of Hynix's asset sales continue to boost sentiment towards the company," said David Choi, an analyst at KTB Securities.

Hynix agreed on Monday to sell equipment worth $305 million to a soon-to-be formed back-end joint venture in China. [ID:nSEO343310]

Shares in LG Micron <016990.KQ> and LG Innotek <011070.KS> however underperformed, slashing gains made immediately after shareholders of LG Innotek approved the two companies' second attempt at a merger on Tuesday.

The two component-making units of LG Electronics <066570.KS> had initially agreed to the merger in September, 2008, but called off the plan in early December, citing heavy costs to buy out minority shareholders amid deteriorating financial conditions. [ID:nSEL000388]

LG Micron ended flat and LG Innotek lost 0.45 percent.

"Their merger was long expected ... I'd say investors who were looking to make quick profits took that opportunity today. The two companies are surely set to enjoy synergies from the merger," said Park Kang-ho, an analyst at Daishin Securities.

Shares in LG Electronics <066570.KS> rose 4.59 percent after a local media report that the world's No.3 handset maker saw some 300 billion won in operating profit in April.

"I am not sure whether the reported numbers are accurate, but the company's April sales are expected to have been quite strong. The won-dollar exchange rate was still positive for South Korean exporters in April," said Steve Lee, an analyst at Goodmorning Shinhan Securities.

Banking issues rallied across the board helped by strong rises in their U.S. peers overnight and advances in the won <KRW=> currency.

The S&P financial index <.GSPF> rose 7.19 percent overnight, and the won hit a 1-week-high on Tuesday.

KB Financial Group <105560.KS> jumped 6.22 percent and Hana Financial Group <086790.KS> rose 5.58 percent.

Citigroup upgraded KB Financial Group to "buy" from "hold" and raised its target price by 46 percent to 54,000 won as the holding company of Kookmin Bank is seen benefitting from a domestic turnaround.