Seoul shares closed 2.4 percent lower on Thursday, hit by earnings fears after a bleak sales outlook at Internet media firm Yahoo Inc and as soft domestic economic data sparked a sell-off in blue chips such as SK Telecom and Samsung Electronics.
The central bank's move to lower its economic growth forecast for the second half of the year darkened the market's already gloomy outlook, analysts said.
The benchmark Korea Composite Stock Price Index (KOSPI) dropped 2.39 percent to close at the session low of 743.64.
Kim expected the KOSPI to test 720 points, near the 2004 year low of 716.95, as the market was more vulnerable to downside risks due to the dim prospects of a recovery in domestic consumption.
The central bank slashed its economic growth forecast for the second half of 2004 to 5.0 percent on the year, from the previous 5.6 percent projection, but retained its forecast for all of 2004 at 5.2 percent.
Reflecting the current poor economic conditions, a government survey showed on Thursday consumer sentiment deteriorated further in June.
Technology shares and Internet-related companies led the market's decline after Yahoo Inc tumbled 13 percent in after-hours trade in New York.
Shares in Samsung Electronics Co Ltd, the world's biggest maker of memory chips, dropped 3.89 percent to end at a nine-month low of 420,000 won.
SK Telecom Co, the country's top mobile carrier, plunged 5.4 percent to 176,000 won and Internet portals NHN Corp and Daum Communications Corp fell 4.44 percent and 7.11 percent to close at 103,200 won and 47,000 won respectively.
Shares in Dacom Corp fell 8.73 percent to 4,130 won after it gained more than 10 percent this week up until Wednesday, propelled by earnings hopes.
Dacom said it expected to beat its 2004 earnings guidance but analysts pointed out the country's second-largest fixed-line operator failed to offer details on how it expected to do so.
Losers outnumbers gainers by 437 to 263, with 74 issues ending unchanged.
Bucking the downward trend, POSCO Co Ltd, the country's third-largest stock, edged up 0.33 percent to 150,500 won as the world's fourth-largest steel maker looks set to report record quarterly profit on Tuesday.
Shares in seafood firm Dongwon Fisheries Co Ltd jumped 11 percent to end at 10,450 won, lifted by optimism fresh outbreaks of bird flu in China and Thailand would boost its sales.
Trade was thin with 345.7 million shares changing hands versus 395 million on Wednesday.
Foreign investors sold a net 45.3 billion won ($39.22 million) in shares and institutional investors sold a net 239 billion won. Retail investors purchased a net 273.7 billion won worth.
The September KOSPI 200 futures index ended down 2.40 points at 95.70 and the underlying KOSPI 200 spot index fell 2.68 points to 95.78.