Seoul shares slip as N.Korea fears, banks weigh

* KOSPI hurt by N.Korea missle site reports

* Refiners lose ground amid price reductions

* Financials weak after FSC suspends troubled savings banks

SEOUL, Feb 17 (Reuters) - Seoul shares gave up initial gains and turned lower on Thursday, weighed by reports North Korea was completing a second missile launch site and falls in financials after a regulator suspended operations of troubled mutual savings banks.

The Korea Composite Stock Price Index .KS11 (KOSPI) was down 0.32 percent at 1982.97 points as of 0206 GMT.

"News that North Korea has nearly completed building a second missile launch site weakened already fragile investor sentiment," said Kim Seung-han, a market analyst at HI Investment & Securities.

North Korea appears close to finishing a second launch site for long-range missiles, media reports said on Thursday, amid U.S. concerns that Pyongyang's ballistic missile programme is fast becoming a direct threat.[ID:nTOE71F07E]

"Foreign investors also remain passive, not buying much despite their recent selling spree," Kim added.

Foreign investors were buyers of a net 46.3 billion won ($41.51 million) worth of stocks, poised to snap a two-session selling streak.

Banking issues underperformed after South Korea unveiled measures to provide cash support to troubled savings banks, and imposed a six-month suspension of operations on two banks hit by liquidity shortages.[ID:nTOE71F078]

Funding for the credit line was pulled from the state-run Korea Finance Corporation and major commercial banks Woori, Kookmin, Shinhan and Hana, according to a statement from the Financial Supervisory Commission (FSC).

Shares in KB Financial Group (105560.KS), a holding firm for Kookmin Bank, fell 1.2 percent. Shares in Hana Financial Group (086790.KS), parent group for Hana Bank, dipped 1.3 percent.

Shares in LG Chem (051910.KS) advanced 3.1 percent following recent falls and on its robust earnings outlook for the year.

Shares in LG Chem lost nearly 12 percent so far this month as of Wednesday's close, compared with the broader market's 3.9 percent decline.

"LG Chem is forecast to post around 28 percent operating profit growth this year compared to a year before. This means we will see another round of quarterly record profits," said Baek Young-chan, an analyst at SK Securities.

"Demand for its battery products, which go into a lot of devices, from iPods to hybrid cars, will grow strongly," Baek added.

Crude oil refiners retreated sharply for a second day as firms lowered prices of heating oil amid government pressure.

SK Innovation (096770.KS) tumbled nearly 6 percent after South Korea's top crude refiner on Wednesday cut the price of heating oil by 50 won per liter. S-Oil (010950.KS) shed 6.4 percent after it slashed heating oil prices by 60 won per liter.

(Reporting by Jungyoun Park; Editing by Jonathan Hopfner)