Seoul shares hit 14-mth closing high; banks gain

* KOSPI advances 1.13 percent

* Foreign buying, gains in tech, bank stocks lift market

* POSCO rises on stronger won, outlook (Updates to close)

SEOUL, Sept 15 - Seoul shares rose on Tuesday to their highest close in 14 months as technology issues including LG Electronics <066570.KS> rebounded firmly, while gains by banks such as Shinhan Financial <055550.KS> added momentum.

The Korea Composite Stock Price Index <.KS11> (KOSPI) finished up 1.13 percent at 1,653.40 points, the highest close since early July, 2008.

"Technology and auto issues gained after their latest losses, and strengthened foreign buying helped lift the market to a new high on the year," said Hwang Keum-dan, a market analyst at Samsung Securities.

"The won has strengthened against the dollar, but the Japanese yen is still comparatively stronger against the won, which does not hurt the price competitiveness of South Korean export goods against Japanese goods," Hwang added.

Hyundai Motor <005380.KS> rose 3.33 percent and LG Electronics <066570.KS> advanced 3.25 percent.

Foreign investors were buyers of 361.2 billion won ($296 million) worth of shares and institutions were sellers of 359.8 billion won.

Retail investors were sellers of a net 7.55 billion won.

POSCO <005490.KS> rose 3.21 percent as the won <KRW=> continued to strengthen, making the cost of importing raw materials from overseas cheaper.

"In addition to the forex factor, investors are shifting their focus away from techs and autos, and are buying relatively less-expensive POSCO shares," said Shin Yun-shik, a market analyst at Meritz Securities.

"Also, market talk that POSCO has internally decided to drop its bidding interest in Daewoo Engineering & Construction <047040.KS> also helped," Shin added.

KCC Corp <002380.KS> rose 1 percent after the manufacturer of industrial materials said it had sold its stake in Airport Railroad Co Ltd for 3.5 trillion won ($2.87 billion).

Banks continued to fuel markets. Shinhan Financial Group <055550.KS> gained 4.46 percent and Korea Exchange Bank <004940.KS> climbed 6.1 percent.

Strengthening economic hopes stoked expectations than an earnings recovery for banks may come about faster than expected, according to Sung Byung-soo, an analyst at Prudential Investment & Securities.

"We saw net interest margins improve in July and August, and this also pointed to hopes banks could be facing lower credit costs," Sung added.

Ssangyong Motor <003620.KS> fell 3.92 percent in volatile trade after a local media report on Tuesday said the cash-strapped sport utility vehicle maker had cut its sales target for the year.

But losses at Doosan Heavy Industries <034020.KS> weighed, with shares retreating 1.47 percent after the company said late on Monday that it had agreed to buy Czech turbine maker Skoda Power for 450 million euros ($654 million). [ID:nSEO113376]