*KOSPI loses 1.15 pct
*Kia Motors falls on bond issuance talk
*LG Display tumbles on stake sale rumors
(Updates to close)
By Jungyoun Park
SEOUL, Feb 26 (Reuters) - Seoul shares fell on Thursday led by Kia Motors (000270.KS) and LG Display (034220.KS), but rose from the session low after South Korea unveiled measures aimed at spurring foreign investment in local public bonds.
The Korea Composite Stock Price Index .KS11 (KOSPI) finished down 1.15 percent at 1,054.79 points, giving up an earlier 3 percent gain to the session high of 1,100.45 points.
"Worries that Citigroup may be nationalised and persistent concerns about Eastern European banks, pointing to the likelihood of growing avoidance of emerging market currencies, weighed on markets," said Bae Sung-young.
"As the outlook and sentiment worsens, we are seeing foreign programme selling positions being accumulated in massive amounts -- a pattern repreatedly seen before markets turn for the worse," Bae added.
But the KOSPI index ended 18 points above the session low of 1,036.67 after South Korea unveiled a string of measures aimed at encouraging foreign investment in domestic public bonds in order to dispel concerns about the country's dollar shortages. [ID:nSEV000624]
Kia Motors (000270.KS) tumbled 9.32 percent on market talk the South Korean automaker may issue bonds with warrants, which would give holders the rights to buy new shares.
A Kia Motors official told Reuters a bonds with warrants issuance was under consideration.
The issuance is expected to be worth around 400 billion won ($263.9 million), which stoked concerns it may dilute shareholder value, according to Kevin Lee, an analyst at Goodmorning Shinhan Securities.
Shares in LG Display (034220.KS) also lost ground on rumors Philips (PHG.N) may sell down its around 13 percent stake in the world's No.2 liquid crystal display maker.
"This is not new, but there are rumors that Philips may in the near future cut its stake in LG Display. That is weighing on shares," said Jeff Kim, an analyst of Hyundai Securities.
"There has not been any big change in LG Display's fundamentals," Kim added.
However KT Corp (030200.KS) advanced 0.79 percent after South Korea's anti-trust agency approved on Wednesday KT's plan to merge with its mobile unit without conditions. [ID:nSEL000508]
Broadcaster SBS (034120.KS) climbed 4 percent over hopes for media regulation changes that could allow it to air commercials during programs.
A revised media bill was presented to a parliament committee without opposition party approval, according to local media reports on Thursday.
"There are disputes over the revised bill, but I think the market is betting on its passage...SBS could definitely be a big beneficiary of the change as it would be allowed to air commercials during programs," said Sohn Yoon-kyung, an analyst at Kiwoom.Com Securities.
Further weakness in the won and continued worries about the economy sent retail issues lower. Shinsegae Co Ltd (004170.KS) slid 2.28 percent and Lotte Shopping Co Ltd (023530.KS) sank 2.5 percent.