South Korean stocks closed 2.08 percent lower on Thursday as foreign investors dumped local stocks on nagging concerns about Europe’s debt crisis, analysts said. The local currency fell against the U.S. dollar for the sixth straight session.

The benchmark KOSPI trimmed 38.64 points to 1,819.11. Trading volume was moderate at 402.3 million shares worth 5.31 trillion won ($4.57 billion), with losers outpacing gainers 658 to 178.

“Contagion fears about Europe’s debt crisis gripped investor sentiment. Disagreements over how to solve the crisis among European nations increased jitters, sparking foreign sell-offs,” said Lee Sun-yup, a market analyst at Shinhan Investment Corp.

Global ratings agency Fitch Ratings downgraded credit ratings for five European banks including Credit Agricole SA by one notch, throwing cold water on investor sentiment.

Downside risks to the global economy have piled up as a new fiscal compact for the European Union was short of fully countering the eurozone sovereign turmoil. The Federal Reserve said that strains in global financial markets continue to pose “significant downside risks” to the growth outlook.

Foreign investors were net sellers of local stocks for the third consecutive day. They disposed of a net 290 billion won worth of local stocks.

Most shares traded in negative territory, except for defensive stocks. The key stock index declined as much as 2.16 percent at one point, hit by foreign selling.

Financial shares were under selling pressure on concerns that Europe’s debt crisis may squeeze foreign currency liquidity. Top banking group Woori Finance shed 1.35 percent to 9,500 won and its rival Shinhan Financial Group fell 3.43 percent to 38,000 won.

Refiners fell as oil prices tumbled after the Organization of the Petroleum Exporting Countries (OPEC) agreed to increase daily production ceiling. Leading refiner SK Innovation declined 6.88 percent to 149,000 won and its smaller rival S-Oil lost 4.72 percent to 101,000 won.

Market leader Samsung Electronics fell 2.4 percent to 1,015,000 won and chip giant Hynix Semiconductor dipped 0.44 percent to 22,750 won.

Defensive issues, which tend to relatively remain firm even amid an economic slowdown, gained ground. Power monopoly Korea Electric Power Corp. rose 1.92 percent to 26,550 won and state-run Korea Gas Corp. added 1.98 percent to 43,800 won.

The local currency closed at 1,163 won to the greenback, down 6.8 won from Wednesday’s close, as foreign investors reduced their holdings of local stocks, dealers said.
 

(Yonhap News)