South Korean stocks closed nearly flat Wednesday as investors took a wait-and-see approach ahead of the US rate decision slated for this week. The local currency declined against the US dollar.

The benchmark Korea Composite Stock Price Index added 0.53 point, or 0.02 percent, to finish at 2,559.74.

Trading volume was slightly thin at 407.3 million shares worth 7.4 trillion won ($5.6 billion), with decliners outpacing winners 517 to 353.

Individuals and institutions purchased 88.9 billion won and 50.2 billion won worth of local shares, respectively, while offshore investors sold off a net 166.6 billion won.

All three US stock indexes closed lower Tuesday on the eve of the Federal Reserve's interest rate announcement, which is expected to keep rates on hold.

But the market expects the US central bank may deliver one more rate hike this year as higher energy costs will likely heat up inflation and curb economic growth.

"A climb in US bond yields weighed down on the stock markets a day ahead of the September Federal Open Market Committee meeting," Lee Kyoung-min, an analyst at Daishin Securities Co., said.

In Seoul, big-cap stocks traded mixed.

Samsung Electronics, one of the world's biggest chipmakers, dropped 0.29 percent to 69,600 won, and No. 2 chipmaker SK hynix lost more than 1 percent to 118,000 won.

IT and bio stocks also ended in negative terrain.

Internet portal operator Naver retreated 0.91 percent to 217,500 won, and Kakao, the operator of the country's top mobile messenger, fell 1.57 percent to 47,100 won.

Samsung Biologics went down 1.01 percent to 118,000 won, and Celltrion dipped 0.21 percent to 145,300 won.

In contrast, battery and auto shares gained ground.

Leading battery maker LG Energy Solution rose 0.6 percent to 499,500 won, and its smaller rival Samsung SDI climbed 0.9 percent to 563,000 won.

Top automaker Hyundai Motor jumped 2.58 percent to 194,900 won, its smaller affiliate Kia advanced 2.52 percent to 81,400 won, and its auto parts-making affiliate Hyundai Mobis rose 2.32 percent to 242,500 won.

Posco group shares were also strong.

Steel giant Posco Holdings added 0.17 percent to 594,000 won, its battery-component making affiliate Posco Future M shot up 3.66 percent to 411,000 won, and its energy trading unit Posco International jumped 2.39 percent to 81,300 won.

The Korean won ended at 1,330.10 won against the US dollar, down 1.6 won from Tuesday's close. (Yonhap)