Seoul shares had their biggest fall in three years on Friday, hitting a five-week closing low, as financials such as Kookmin Bank were pounded by a global credit squeeze that prompted investors to seek the safety of bonds.
Samsung Electronics and other exporters skid on concerns the US subprime turmoil would hurt growth in South Korea's No 2 export market, while Hyundai Heavy Industries Co sank 7 percent after its operating profit missed forecasts.
The main KOSPI ended a turbulent week down 2.6 percent, and has now fallen 9.3 percent since hitting an all-time high of 2,015.48 points on July 26 - wiping out $72 billion off its market value.
"This is a structural crisis, so we're not going to see a meaningful rebound in markets at least before October," said Chang In-whan, chief executive of KTB Asset Management. The benchmark Korea Composite Stock Price Index fell 4.2 percent to 1,828.49 points, its lowest close since July 3 and marking its biggest daily percentage fall since May 17, 2004.
The jitters over stocks helped boost South Korean bond futures, which surged 27 ticks to 107.42. Foreign investors resumed selling on the main board, just a day after snapping an 18-day selling spree. They unloaded a net 525.5 billion won ($564.6 million) worth of shares on Friday.
The Bank of Korea's surprise interest rate rise on Thursday also kept investors on edge, as the move sent signals it was determined to check liquidity in the market and wanted to slow fund inflows into equities, analysts said.