South Korean stocks declined 1.49 percent Friday as the U.S. Federal Reserve chief's remark on its stimulus actions continued to weigh on investors' sentiment, analysts said. The local currency continued its slide against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) shed 27.66 points to close at 1,822.83. Trading volume was low at 281.8 million shares worth 4.89 trillion won (US$4.24 billion) with losers far outpacing gainers 640 to 199. It marked the lowest level since 1,782.47 tallied on July 26, 2012.

The KOSPI shed 2 percent Thursday from the previous trading session to close at 1,850.49.

"Seoul shares lost ground as the anticipated U.S. policy move sparked the emerging markets' volatility," said Lim Soo-kyun, a researcher at Samsung Securities Co. "Foreign investors will sell local shares for the time being."

Kim Sun-young, a researcher at IBK Investment & Securities Co., echoed the view, adding the slump in the stock market is attributable to the rising concerns over the U.S. policy moves, which dented investors' appetite for riskier assets.

Fed Chairman Ben Bernanke said Wednesday (local time) the U.S. central bank is likely to start slowing the pace of its $85 billion monthly bond purchase program this year as its economy is improving.

Bernanke said that the Fed could end the stimulus program by mid-2014 after continuing to gradually scale back the pace of the purchase.

"However, this is also an opportunity to scoop up undervalued shares, as a reduction in the U.S. quantitative easing also implies an economic recovery down the road," said Eun Sung-min, an analyst at Meritz Securities Co.

Foreigners offloaded 775.1 billion won worth of local equities, marking the 11th straight session of a selling spree. Retail investors purchased a net 100.1 billion won, and institutions scooped up a net 677.5 billion won.

Tech shares closed lower, with No. 1 Samsung Electronics falling 0.3 percent to 1,325,000 won and its rival LG Electronics losing 2.72 percent to 71,500 won. Flat panel maker LG Display shed 2.81 percent to 27,650 won.

Carmakers also traded bearish, with Hyundai Motor losing 2.65 percent to 202,000 won and its affiliate Kia Motors falling 3.07 percent to 56,900 won. Leading auto parts maker Hyundai Mobis shed 1.34 percent.

Brokerage houses traded lower amid volatility in the local financial market, with Samsung Securities losing 1.51 percent to 45,750 won and KDB Daewoo Securities falling 1.81 percent to 9,740 won.

Local zinc smelter Korea Zinc shed 3.2 percent to 272,000 won due to a drop in global gold prices. Top steelmaker POSCO plunged 5.01 percent to 294,000 won.

In contrast, logistics firms gathered ground, with Hyundai Glovis adding 1.88 percent to 189,500 won and Hyundai Merchant Marine climbing 8.45 percent to 15,400 won.

The local currency ended at 1,154.70 won against the greenback, down 9.00 won from Thursday's close to hit a one-year low, as investors scooped up the U.S. dollar following the Fed's remark, dealers said.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasuries gained 0.1 percentage point to 3.04 percent, and the return on the benchmark five-year government bonds moved up 0.16 percentage point to 3.32 percent. (Yonhap News)