South Korean stocks are expected to face an extended loss next week, as uncertainties about a potential rate hike by the U.S. Federal Reserve continue amid the lingering aftershock of China's yuan devaluations, analysts said Saturday.
The benchmark Korea Composite Stock Price Index (KOSPI) slumped 5.5 percent this week to close at 1,876.07 on Friday, hitting the lowest point in two years.
The main index began the week in negative terrain as the lingering aftershock from the yuan devaluations last week continued to roil the local stock market.
The Thursday release of the Fed's July minutes further stoked fears among foreigners, causing them to leave the local market, as its statement about the world's largest economy not showing a clear sign of recovery so it can start raising the interest rate triggered capital outflow.
Offshore investors sold a combined 720 billion won worth of local equities this week, with individuals also dumping a net 370 billion won. Institutions bought a net 890 billion won.
Analysts said the Seoul bourse will likely experience another round of volatile trading next week given the external risks from the world's two superpowers.
"Concerns are growing over the emerging markets, especially on China and any repercussions from its weaker currency. We expect this to continue until the Fed comes up with something more concrete at the September meeting," said Ko Seung-hee, an analyst at KDB Daewoo Securities Co.
The heightening geopolitical tension here following the cross-border artillery firing between the two Koreas will continue to add jitters to the volatile market, Ko said.
Stocks that are less sensitive to such market volatility are likely to gather ground next week, such as telecom, banks and insurance firms, the analyst added.
Telecom issues were the top gainer this week with a 1.9 percent increase, followed by utilities which rose 0.9 percent.
Non-metallic mineral companies were among the biggest decliners, recording a 15.7 percent fall. (Yonhap)