South Korean stocks declined to a four-month low Friday, extending the fall for a second day since the new year started as uncertainties about local equity market prompted foreigners to unload their holdings, analysts said. The local currency lost ground against the U.S. dollar.

The benchmark Korea Composite Stock Price Index retreated 21.05 points, or 1.07 percent, to close at 1,946.14, the lowest level since Sept. 3, 2013. Trading volume was light at 186.1 million shares worth 3.94 trillion won ($3.75 billion) with losers outpacing gainers 466 to 340.

"It's a one-off January fear. Investors want answers about the yen, as to what extent Samsung Electronics fared worse in the fourth quarter. But the market is too uncertain to tell you anything for sure," said Han Beom-ho, an analyst at Shinhan Investment Corp.

The main index dipped more than 2 percent on the previous day as renewed fear of a weaker Japanese currency weighed on investor confidence, along with a dim market estimate for fourth-quarter earnings by Samsung Electronics.

But Friday's fall is more about a one-off factor, Han said, in which investors are less confident to make risky bets as the market hasn't shown a clear direction yet.

Also, the foreign selling came as part of their portfolio readjustment and "doesn't mean an exit from the local market," he added. Overseas investors sold off a net 318.3 billion won, following the 306.3 billion won net selling from Thursday.

Shares dropped across the board, with large-cap financial firms and builders leading the decline. Shinhan Financial Group, the biggest banking firm by market cap, tumbled 3.76 percent to 44,850 won, with Daelim Industrial, a major builder, slumping 3.35 percent to 89,500 won.

Market bellwether Samsung Electronics capped its fall to less than 1 percent to 1,296,000 won, compared with a nearly 5 percent plunge in the previous session.

The local currency retreated from the two-year advance to the greenback, ending down 4.9 won to 1,055.20 won, largely due to the KOSPI's fall and signs of possible government intervention against the currency volatility.

Finance Minister Hyun Oh-seok reinforced the stance on the currency moves, saying Friday the authorities are "closely watching the foreign exchange market" and will take necessary measures to reduce any sharp volatility. (Yonhap News)