South Korean stocks are likely to come under downward pressure next week amid concerns that the US Federal Reserve's tapering policy may be harsher than expected, analysts said Saturday.

The benchmark Korea Composite Stock Price Index (KOSPI) closed at 2,954.89 points Friday, down 0.76 percent from last Thursday, the final session of last year.

Stocks traded bearish this week, as investors are worried that the Fed's latest minutes supported aggressive rate hikes and a contraction of its balance sheet.

Last month, the Fed said it may double the pace of its stimulus withdrawal and projected three rate hikes this year.

The KOSPI rebounded on Friday, largely on optimism for local chipmakers' earnings forecast in the fourth quarter of 2021.

Analysts said local stock markets will be subject to volatility next week.

Investors are increasingly betting on the early hike of the key interest rates by the Fed, as reflected in the continued rise of long-term bond yields in the United States.

"The Fed's December minutes say the rate hike may come sooner, at a faster pace," NH Investment & Securities analyst Kim Young-hwan said.

"The financial industry is expecting a rate hike in March," he said.

The global spread of the omicron strain of the new coronavirus added to the market worries.

China's lockdown of major cities, including Xian, where production facilities of South Korean chipmakers are located, fueled concerns that the resurgence of the highly contagious virus may hamper the global economy ahead of the Beijing Winter Olympic Games next month.

Amid market jitters about the Fed's rate hike, analysts are paying keen attention to the upcoming economic gauges.

"The US December retail sales is quite the most important indicator for consumption (and price pressure)," Mirae Asset Securities analyst Park Hee-chan said.

US consumer prices and South Korea's jobless data for December will be published next Wednesday.

On Thursday, the US retail sales for December will be released, and the Bank of Korea's monetary meeting will be held. (Yonhap)