The benchmark KOSPI index ended down 74.72 points at 1,943.75, a five-month low. The index has lost a total of 10.5 percent since Monday's close.

"It was the worst day since the 2008 financial crisis," Lee Young-Won, an analyst at HMC Investment Securities, told Yonhap news agency.

"In four days, we lost more than 200 points. This kind of shock doesn't happen often."

Following Wall Street's overnight plunge, the KOSPI plummeted in the morning session, falling as much as 4.85 percent at one point.

"Investors are fretting about possible US monetary tightening while they are also doubtful that the US government can do anything any more if things get worse from here," said Lee Sun-Yup, an analyst at Shinhan Investment Corp.

"Interest rates have remained zero and two rounds of stimulus packages have been thrown into the market already," Lee told Yonhap

Foreign and retail investors were engaged in panic selling, sending all sectors sharply lower. Institutional investors and pension funds were rare buyers.

Exporters were hit hardest because of fears over the US economy and the eurozone debt crisis, with shipbuilders suffering badly.

Daewoo Shipbuilding and Marine Engineering slumped 10.44 percent to 30,450 won and Hyundai Heavy Industries dropped 5.75 percent to 352,500.

Makers of flat panels were also hard hit. Samsung Electronics fell 3.9 percent to 789,000 won and LG Display dropped 7.09 percent to 23,600.

Leading oil refiners also suffered. SK Innovation finished at 185,000 won, down 5.61 percent, and S-Oil fell 7.77 percent to 130,500.

Copyright AFP (Agence France-Presse), 2011