* S.Korea Oct factory output down amid woes about moderation
* BOK seen delaying interest rate increase
* Double dip unlikely on firm exports, domestic demand
* Exports in 2010 seen up 13 pct
(Recasts with factory output, analysts)
By Cheon Jong-woo
SEOUL, Nov 30 (Reuters) - South Korean factory output unexpectedly fell in October, underscoring the central bank's increasing caution about the economy as the effect of global stimulus spending fades.
The data reinforced the market's view that the Bank of Korea will hold interest rates steady at a record low for one or two more months until it becomes more confident that the global economic recovery is gaining momentum.
"The data is reinforcing our expectations that the Bank of Korea is unlikely to raise interest rates soon," said Kim Jae-eun, an economist at Hyundai Securities, adding she now expects no rate increase during the first half of next year.
Industrial output in Asia's fourth-largest economy fell by a seasonally adjusted 3.8 percent in October from September, government data showed on Monday, compared a median 4.2 percent rise forecast in a Reuters poll.
Japan and Singapore also unveiled weaker-than-expected readings on Monday for their industrial activity for October. [ID:nTKU105703] [ID:nSGC003382]
The moderation in output of major Asian economies came amid worries about a double-dip in the region, but analysts said South Korea was unlikely to see such a contraction as export and domestic demand remained solid.
"This is a disappointment. But, don't get too carried away. November exports out tomorrow should be strong, helping to ease fears of a double dip," said Frederic Neumann, an economist at HSBC in Hong Kong.
Exports in November probably rose 20.9 percent from a year ago, the first annual rise in 13 months, a Reuters poll showed, and the government said overseas sales will return to double-digit growth in 2010. [ID:nSP280898]
"Plus, shoppers in Korea haven't taken notice of a slowing industrial cycle. And that, in the end, is what matters," he added.
Industrial output rose merely 0.2 percent from a year ago, far missing expectations of 4.1 percent growth in the poll, but production in October would have risen by 4.2 percent over a year before when adjusted for fewer working days this year, Statistics Korea said.
EXPORTS SEEN UP 13 PCT IN 2010
Exports will grow 12.9 percent next year after a projected 13.9 percent loss this year, the ministry said in a statement. The projection for this year would be the worst since 1958.
Despite the robust turnaround, annual export value in 2010 will still fall short of the performance in 2008, underlining that the recovery in global trade from the shock of the U.S. subprime mortgage crisis would be slow and fragile.
"The global economy is expected to recover modestly but there are possibilities of a double-dip," the ministry said.
"The economy is still facing risks of a further fall on possible financial market turmoil, weaker impacts from fiscal expansionary policy and weak employment," it added.
Imports in 2010 will probably grow by 21.5 percent after falling 26.3 percent this year, with recovering domestic demand for imported goods and rising commodities prices responsible for the gain, it said.
The expectations are based on an assumption that the economy would grow by between 5.0 percent and 5.5 percent next year, the ministry said. President Lee Myung-bak said on Friday next year's growth could top 5 percent. [ID:nSEO13502] (Additional reporting by Seo Eun-kyung; Editing by Kim Coghill) ((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))