South Korea’s benchmark stock index fell below the 2,000 mark for the first time in about five months Tuesday, in the wake of China’s artificial currency depreciation as well as a selling streak led by foreign and institutional investors.

The KOSPI lost 16.52 points, or 0.82 percent, from the previous trading session to close at 1,986.65.

This marked the first time the index stayed below the 2,000 mark since it posted 1,987.33 on March 16. The closing price Tuesday was the lowest since it touched 1,985.79 on March 13.

After peaking at 2,173.41 on April 23, it has been on a downward trend on concerns over a possible interest rate hike in the Unites States as well as a slump in exports.

Though small investors recorded a net-purchase of 73.9 billion won ($62.9 million) on the main bourse, foreign and institutional investors net-sold stocks worth 85.6 billion won and 15.6 billion won, respectively.

Four out of the top five stocks in market capitalization fell on the day. AmorePacific lost 3.49 percent to close at 401,000 won, and three others -- Korea Electric Power Corp., Hyundai Motor and SK Hynix -- posted a drop between 0.55 percent and 1.95 percent.

As China’s monetary authority has decided to depreciate its yuan currency versus the U.S. dollar due to the country’s economic slowdown, negative outlook on Korean exporters is estimated to have grown among market participants.

“The (quality) gap between Korean and Chinese manufacturing goods has rapidly narrowed. And the depreciation could feasibly undermine price competitiveness of the local export sector,” said a researcher from LG Economic Research Institute. The secondary KOSDAQ also dropped to close at 732.26, down 14.08 points or 1.89 percent from a session before.

Meanwhile, the U.S. dollar climbed by 15.9 won from the earlier session to close at 1,179.1 won on the news that China conducted the currency devaluation.

The Korea currency posted the weakest position against the greenback in 38 months since the exchange rate reached 1,180.1 won on June 5, 2012.

Some market insiders forecasted that a “currency war” among three major Asian exporters, including Japan, would be rekindled.

By Kim Yon-se (kys@heraldcorp.com)