Seoul shares fell sharply on Thursday as worries about potential US inflation hit exporters such as Samsung Electronics, while other blue chips fell on concerns that a recent record-setting rally was overblown.
Foreign investors were net sellers for a 10th consecutive session, bringing net sales during the period to 1.2 trillion won ($1.16 billion), staying out of a domestic liquidity-led surge that had sent shares up nearly 40 percent this year.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 2.03 percent to end at 1,202.49, retreating further from a record 1,246.41 hit early in Wednesday's session.
Kia Motors Corp, the country's second-biggest auto maker, fell 4.95 percent to 18,250 won. Handset maker LG Electronics Inc fell 1.26 percent to 70,500 won.
Shares were also hit as investors feared prices may have risne too much ahead of quarterly earnings, due out from next week. Samsung Electronics reports next Friday.
Concerns that the Bank of Korea could raise interest rates for the first time in more than three years during its meeting next week also weighed on shares, analysts said.
Park Seung, the country's central bank chief said on Thursday he had not meant to suggest interest rates would definitely be raised in October in remarks he made after last month's rate-setting meeting.
POSCO Co Ltd, the world's fifth-biggest steel maker, fell 2.67 percent to 219,000 won amid worries about second-half earnings in the sector. Trade volume reached 509.6 million shares worth 4.1 trillion won compared to 514.8 million shares worth 4.4 trillion won on Wednesday. Decliners doubled gainers by 501 to 247 with 63 titles ending flat.
Foreign investors sold a net of 207.9 billion won in shares on the main bourse, while retail investors bought a net of 410.7 billion won. Institutional investors sold a net of 256.3 billion won.
The December KOSPI 200 futures index fell 3.80 points to 154.20, while the underlying KOSPI 200 spot index dropped 3.45 points to 154.65.
South Korea's junior and tech heavy Kosdaq market fell 0.61 percent to finish at 588.52, reversing a gaining streak of seven consecutive sessions.