South Korean stocks shed 1.28 percent on Thursday, as foreign investors who got unnerved by China's stock market rout continued their selling spree here, analysts said. The Korean won gained slightly against the U.S.
dollar.

The benchmark Korea Composite Stock Price Index retreated 24.83 points to finish at 1,914.55, the lowest level since Jan. 15. Trading volume was moderate at 388.3 million shares worth 5.06 trillion won ($4.27 billion) with decliners outpacing gainers 598 to 223.

"The global market has lost faith in China. Investors are increasingly worried the Chinese market may further collapse and are choosing to leave the emerging markets. We expect the KOSPI to nosedive to as much as the 1,850-point mark," said Han Yo-seop, an analyst at KDB Daewoo Securities Co.

The sharp fall in the Chinese stock market has battered its neighboring peers as an aftershock following the spate of yuan devaluations last week.

The Shanghai Composite Index tumbled more than 6 percent on Tuesday, before eking out a gain the next session. The index again slumped 3.42 percent on Thursday.

It is unlikely that the KOSPI will recover from the China rout any time soon, unless there comes fresh momentum, Han added.

"If the Fed keeps its dovish stance and promise a gradual rate increase, it will help alleviate the market uncertainties," the analyst said.

Foreigners unloaded a net 295 billion won worth of local stocks, extending its selling binge for an 11th day. Individuals also sold off a net 38.1 billion won, while institutions bought a net 289.7 billion won.   

Steelmakers and machineries drove down the main index. Steel producer POSCO fell 2.4 percent to 183,000 won, with Doosan Heavy Industries & Construction, South Korea's leading power equipment maker, tumbling 6.12 percent to 17,650 won.

Top-cap Samsung Electronics also ended down 1.3 percent to 1,139,000 won.

In contrast, major utility and retail firms, usually deemed as defensive stocks, finished bullish. State-run electricity provider Korea Electric Power Corp. climbed 2.17 percent to 51,700 won and Hyundai Department Store rose 2.01 percent to 152,000 won.

The local currency ended at 1,185.10 won against the greenback, up 0.2 won from Wednesday's close, amid growing jitters about the Chinese financial market, dealers said.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasurys edged down 1.6 basis points to 1.714 percent and the return on the benchmark five-year government bonds also fell 3.6 basis points to 1.902 percent. (Yonhap)