S.Korea shares up on foreign inflows but U.S. shutdown fears cap gains

* Trade volume light as U.S. on brink of shutdown

* Foreigners, institutions purchase local stocks

* Samsung SDI rise again on bullish earnings outlook

SEOUL, Oct 1 (Reuters) - South Korean shares rose on Tuesday morning, buoyed by extended foreign buying, but gains were capped by fears that the U.S. government was on the brink of a major shutdown.

The Korea Composite Stock Price Index (KOSPI) was up 0.7 percent at 2,010.62 by 0200 GMT, after touching an intraday low of 1,996.77.

"Trading is subdued as investors closely await news from Washington," said Shinhan Securities analyst Han Beom-ho, before adding, "The market could rapidly move to negative terrain if U.S. government shutdown becomes a reality."

Some investors also took heart from China's official survey of factory activity, although it did not improve as much as expected. The official September manufacturing purchasing managers' index (PMI) was at 51.1, rising from August 51.0.

Earlier in the day, a similar private survey showed South Korea's manufacturing activity contracted for the fourth consecutive month in September, while another report showed exports also contracted at the sharpest pace in seven month, recording a 1.5 percent year-on-year decline.

Foreigners were on track for a 25th consecutive session of net buying, purchasing 66.5 billion won ($61.88 million) worth of local shares in the morning.

Meanwhile, institutions repositioned themselves as net-buyers by purchasing 20.3 billion won after 15 consecutive sessions of selling.

Automaker Hyundai Motor Co rose 1.6 percent, while its affiliates Kia Motors Corp and Hyundai Mobis Co Ltd advanced 2 percent and 1.2 percent, respectively.

Samsung SDI Co Ltd rose 2.1 percent after electric automaker Tesla Motors Inc gained overnight, heightening prospects for better sales of secondary batteries. Its affiliate Samsung Electronics Co Ltd rose 1 percent.

Defensive sector plays outperformed amid broader market uncertainty, with SK Telecom Co Ltd and Hana Financial Group Inc rising 2.3 percent and 1.9 percent, respectively.

Crown Confectionery Co Ltd rose 2 percent after Korean Exchange (KRX) said on Monday the company will be listed to the KOSPI 200 starting Nov.2.

Gaining shares outnumbered decliners 420 to 354.

The KOSPI 200 benchmark of core stocks rose 0.8 percent, while the junior KOSDAQ also edged 0.1 percent higher.