South Korean stocks traded sharply lower late Friday morning, as investors were spooked by the possibility of North Korea conducting a nuclear test and overnight losses on Wall Street. The Korean won fell sharply against the US dollar.

The benchmark Korea Composite Stock Price Index dropped 25.77 points, or 1.25 percent, to 2,036.96 as of 11:20 a.m. 

US stocks closed lower Thursday on a slump in tech stocks, with the Dow Jones industrial average losing 0.3 percent to 18,479.91 points in the face of a dip in Apple Inc. The US electronics company fell some 2.5 percent as its latest iPhone 7 failed to appeal to Wall Street.

Adding to woes, North Korea appeared to have conducted its fifth nuclear test earlier in the day as a massive earthquake was detected near its nuclear site in its northeastern region.

"Overnight falls in the US stock market, coupled with North Korea's potential nuclear test, sapped investor sentiment here," said Lee Sang-hwa, an analyst at Hyundai Securities. "Also, Samsung Electronics' slump is weighing down the overall market sentiment."

Analysts said the North's possible nuke test may have a limited impact on the local stock market as was proven in the past but roil the market for a short period of time.

As widely expected, the Bank of Korea, the country's central bank, froze its policy rate at a record low of 1.25 percent

Top market cap Samsung Electronics tumbled 2.56 percent, and major chipmaker SK hynix was down 0.13 percent.

Naver, the country's top portal operator, shed 2.07 percent. Hyundai Motor, the country's top automaker, fell 0.36 percent.

In contrast, the country's No. 2 automaker Kia Motors rose 0.34 percent, and Korea Electric Power Corp. advanced 1.36 percent.

The South Korean won was trading at 1,100.90 won against the US greenback, down 8.3 won from the previous session's close. (Yonhap)