(Updates to noon)
SEOUL, Jan 20 (Reuters) - South Korean shares edged up to a new 20-month high by midday on Tuesday as Hyundai Engineering and Construction Co soared on hopes for Iraqi contracts, helping to offset faltering blue chips.
Foreigners continued to buy, betting on an exports-driven economic rebound and helping to shore up weak trading ahead of the three-day Lunar New Year holiday.
The key Korea Composite Stock Price Index (KOSPI) added 0.15 percent to 858.09 by noon after rising as high as 860.65 for the first time since May 2002.
"Foreign buying is taking the lead, although the strength of purchases weakened somewhat," said Chu Hee-yeop, a strategist at Dongwon Securities.
"But trade is expected to be confined to a tight range for the day given that investors have little zeal for buying ahead of a long holiday."
Shares in Hyundai Construction jumped 13 percent to 10,850 won on reports that South Korea had been included in a core group of countries to participate in reconstruction projects in Iraq.
Hyundai plans to bid for some Iraqi infrastructure and oil production facilities projects.
Foreign investors bought a net 89.3 billion won of shares on the main bourse, while local institutions sold 71.5 billion won and retail investors unloaded 8.9 billion won.
Volume stood at 187 million shares valued at 1.1 trillion won. Gainers outpaced losers by 361 to 322, with 81 shares unchanged.
BLUE CHIPS HIT
Among blue chips hit by profit-taking were top mobile carrier SK Telecom , which fell 1.37 percent to 216,000 won. Shares in the country's biggest auto maker, Hyundai Motor Co , eased 1.12 percent to 52,900 won.
Market leader Samsung Electronics Co Ltd was flat after hitting an all-time high of 521,000 on Monday.
Daewoo International Corp shares plunged 12.55 percent to 10,100 won as investors locked in profits after three consecutive sessions of hefty rises on news of a major gas discovery in Myanmar.
In a brighter spot for major issues, POSCO Co Ltd rose 1.55 percent to 164,000 won on an improved earnings outlook after the company announced last week plans to raise prices of hot-rolled steel.
Lending some support to the spot market, the March KOSPI 200 futures index rose 0.55 point to 112.85 and the underlying KOSPI 200 spot index climbed 0.34 point to 112.30.
The junior KOSDAQ rose 0.7 percent to 44.46.