Seoul shares closed lower on Monday, after a media report President Roh Moo-hyun had accepted his finance minister's offer to resign and as concerns LCD prices would stay soft until the fourth quarter hit technology stocks. The benchmark Korea Composite Stock Price Index (KOSPI) ended down 0.54 percent at 1,007.50, after rising more than 1 percent at one point during the day.
Yonhap news agency, quoting an official from the presidential Blue House, said Roh had accepted Finance Minister Lee Hun-jai's resignation over media allegations related to breaches of regulations in real estate deals.
Analysts said the resignation had unsettled sentiment due to concerns about the potential impact on government policy.
"His resignation is a short-term factor disturbing the market, which has relied on his growth-supportive economic policies," said Kim Ji-hwan, a strategist at Hyundai Securities.
Technology shares led the market lower after Samsung Electronics Co Ltd, the world's top flat screen maker, said prices of liquid crystal displays (LCD) for computers and TVs wouldn't reverse a slide until the fourth quarter.
Samsung ended 0.6 percent lower at 507,000 won while LG.Philips LCD. Co Ltd, the world's No 2 LCD maker, shed 3.42 percent to end at 41,000 won.
Daewoo Heavy & Machinery Co slid 2.87 percent to 9,140 won after media reports that its union had threatened to stage a one-week partial strike from Monday.
The strike threat surfaced after the collapse of talks with Doosan Heavy Industries & Construction Co over post-acquisition job guarantees, online news provider edaily reported.
Brokers also said caution set in ahead of the expiry of options and the Bank of Korea's monetary policy meeting, both due on Thursday.
"There may be ups and downs in the coming sessions as risk-averse investors are inclined to book recent gains, but I don't think the index has hit its peak for the year," said Kim Sung-ki, a fund manager at Chohung Investment Trust Management.
Helping shore up the market, shares in POSCO Co Ltd, the world's fifth-largest steelmaker, rose 3.92 percent to end at 225,500 won, bolstered by news the government will end a tariff on some iron and copper imports to counter the impact of rising commodity prices.
Shares in Woori Financial Group climbed 5.3 percent to end at 10,400 won, after South Korea's third-biggest financial services group reported last Friday improved earnings on better asset quality.
Buoyed by higher crude oil prices, third-ranked refiner S-Oil Corp jumped 5.13 percent to 82,000 won while top local refiner SK Corp edged up 0.32 percent to 62,500 won.
Oil was trading at $53.64 a barrel in Asia, within sight of a record $55.67 a barrel hit last October.
Shares in sport utility vehicle maker Ssangyong Motor Co fell 1.51 percent to 8,470 won after rising as high as 9,050 won during the day on a newspaper report its Chinese parent company, Shanghai Automotive Industries Corp, was planning to set up a joint plant in China with Ssangyong.
Trade volume reached 598 million shares valued at 4.0 trillion won. Losers beat gainers 446 to 301 with 58 shares ending flat.
Foreign investors sold a net of 10.5 billion won ($10.42 million) in shares on the main bourse, while institutional investors sold a net of 110 billion won.
Retail investors bought a net of 82.4 billion won.
The March KOSPI 200 futures index declined 0.80 point to end at 129.75 and the underlying KOSPI 200 spot index fell 0.50 point to 130.11.
The junior Kosdaq market fell 1.31 percent to 495.32.