By Cheon Jong-woo

SEOUL, SOUTH KOREA (Reuters) - Kia Motors Corp, South Korea's No.2 carmaker, on Friday posted a record quarterly profit, beating market expectations and helping the company's shares extend gains.

Kia, part of Hyundai Motor Group along with affiliate Hyundai Motor Co, the world's No.4 carmaker based on first-half sales, was expected to continue to outpace rivals with new models and a growing appetite for fuel-efficient smaller cars, analysts said.

Echoing the bright outlook, Kia expressed confidence for next year, forecasting sales to grow by a double-digit percentage in 2010.

Hpwever the outlook is not without negatives, with a strengthening won and as global governments phase out measures to boost car demand, they added.

"Kia will continue to enjoy incentives until the end of this year, but key factors for next year are the foreign exchange rate and demand. Neither look too positive for Kia," said Yun Tae-sik, an auto analyst at Dongbu Securities.

On Thursday, Hyundai reported a record quarterly profit, beating forecasts, as government incentives fuelled strong global sales, setting the bar impossibly high for its struggling Japanese rivals.

Kia is expected to post an almost seven-fold jump in annual net profit to 707.0 billion won ($595.1 million) for the whole of 2009, a Thomson Reuters I/B/E/S poll showed.

The maker of the Soul compact car posted a net profit of 402.0 billion won for the third quarter ended Sept. 30, beating a 260.6 billion won profit forecast by 10 analysts in a Reuters poll.

That compared with a 22.1 billion won net loss a year earlier and a 347.1 billion won profit in the second quarter.

Operating profit stood at 313.5 billion won, above a 276.4 billion won poll forecast.

That compared with a 53.7 billion won operating profit a year earlier and a 330.3 billion won operating profit in the April-June period.

Third-quarter net profit was boosted by strong results from affiliates including Hyundai Mobis Co and Hyundai Steel, Kia officials said.

After the results announcement, Kia shares rose 4.96 percent to 18,000 won as of 0215 GMT, outperforming a 0.74 percent gain in the broader market.

Sales rose 31.6 percent to 4.51 trillion won in the July-September quarter over a year earlier.

The results came as the won declined 14.4 percent against the dollar in the third quarter from a year earlier, according to central bank data. But the local currency gained 8.1 percent against the dollar on a quarterly basis, in addition to an 8.6 percent jump in the previous three months.

That bolstered concerns that the company could face weaker earnings from overseas operations, pushing down its stock.

Kia's shares have retreated 7.8 percent so far this quarter, underperforming a 2.6 percent loss on the benchmark KOSPI.