(Updates to midday)
* Analysts see correction phase in near term
* Foreigners reposition to sell local shares
* Chipmakers fall on Applied Material's merger news
SEOUL, Sept 25 (Reuters) - Seoul shares fell on Wednesday morning as uncertainty about the Federal Reserve's policy stance and concerns about a U.S. fiscal struggle jangled nerves.
The Korea Composite Stock Price Index (KOSPI) was down 0.5 percent at 1,997.33 by 0213 GMT, recovering from a session low of 1,988.87.
"The market may be entering a period of corrections in the near term while the political scene in the U.S. settles down," said Woori Investment & Securities analyst Kim Byung-yeon.
A political showdown in the United States has been stirring up volatility as the Oct. 1 deadline approaches for Congress to avert a government shutdown.
Foreign investors repositioned themselves as net-sellers, but offloading only a modest 3.2 billion won ($2.98 million) worth of local shares, which leaves the possibility the market's net-buying streak could extend to 21 consecutive sessions.
Chipmakers Samsung Electronics Co Ltd and SK Hynix Inc fell 0.8 percent and 2.3 percent, respectively, on concerns of a price rise in chip-making gears after Applied Materials Inc said it would acquire Tokyo Electron Ltd that will combine the No.1 and No.3 makers of chip-making gear.
Meanwhile, Samsung Electronics' affiliate Samsung SDI Co Ltd rose 1.4 percent, at one point reaching its highest intraday price in a year, buoyed by better sales prospects for secondary batteries.
STX Pan Ocean Co Ltd rose 3.8 percent after the company said it would raise 200 billion won in short-term debt on Tuesday, increasing its short-term debt to 568.3 billion won.
Kumho Tire Co Inc fell 3.4 percent after creditors of the company said on Tuesday they planned to sell 12.8 million shares at a discount to Tuesday's close, raising up to 137 billion won in a block offering.
Decliners outnumbered gainers 437 to 337.
The KOSPI 200 benchmark of core stocks dropped 0.6 percent, while the junior KOSDAQ edged 0.1 percent lower.
($1 = 1072.3000 Korean won) (Reporting by Jungmin Jang; Editing by Jacqueline Wong)