South Korean stocks declined 0.26 percent on Wednesday and the local currency sank to a four-month low against the U.S. dollar as North Korea claimed that it had conducted a hydrogen bomb for the first time, dampening investor sentiment here.

The benchmark Korea Composite Stock Price Index lost 5.1 points to end at 1,925.43. Trade volume was moderate at 586 million shares worth 5.92 trillion won ($4.94 billion), with losers beating winners 464 to 356.

The index started a tad higher, but lost ground dipping to as low as 1,911.61 points at one point on news that the communist state is believed to have conducted a nuclear test.

But it pared off some of the losses as investors picked up some oversold stocks.

"North Korea's nuclear issue is not having as big an impact (on the market) as was in the past," said Lee Kyung-min, an analyst at Daishin Securities. "Investors will pay attention to how the issue evolves in the future," he said.

Foreigners sold a net 107 billion won, and institutional investors sold off a net 78 billion won.

Market heavyweights traded mixed.

Top market cap Samsung Electronics shed 2.73 percent to end at 1,175,000 won, while global chipmaker SK Hynix gained 0.49 percent to finish at 30,750 won.

State-run Korea Electric Power Corp. advanced 0.2 percent to end at 50,800 won.

No. 1 automaker Hyundai Motor dropped 2.44 percent to end at 140,000 won, and its smaller affiliate Kia Motors declined 2.56 percent to end at 49,400 won.

LG Chem, the country's top chemicals maker, shed 0.44 percent to finish at 338,000 won.

Samsung C&T, the de-facto holding firm of the country's top conglomerate Samsung, rose 2.86 percent to end at 144,000 won.

The local currency ended at 1,197.90 won against the greenback, down 9.9 won from the previous session's close and the lowest level since Sept. 8, due to rising geopolitical risks stemming from the North's alleged hydrogen bomb test.

Bond prices, which move inversely to yields, closed higher on rising appetite for safer assets. The yield on three-year Treasurys shed 0.4 basis point to 1.639 percent, and the return on the benchmark five-year government bonds fell 0.4 basis point to 1.788 percent. (Yonhap)