South Korean stocks retreated Thursday, snapping a three-day gaining streak, as worries about the world economy possibly going into a recession continued to weigh on investor sentiment. The local currency fell sharply against the US dollar.

The Korea Composite Stock Price Index (KOSPI) fell 26.91 points to close at 2,658.99. Trading volume was light at 513.1 million shares worth 7.6 trillion won ($6.06 billion), with decliners outnumbering gainers 520 to 322.

Institutional investors unloaded a net 748.7 billion won worth of local equities, with foreigners also selling off a net 88.3 billion won. Individual investors bought a net 793.7 billion won.

"Inflation is still at the center of the market angst, and at issue is whether in the process of dealing with inflation will we see the economy going into a recession," Han Ji-young, an analyst at Kiwoom Securities Co., said.

Overnight, Wall Street ended lower amid woes over the potential economic impact of the US Federal Reserve's planned tighter monetary policy.

Adding to the jitters were the remarks by Jamie Dimon, chief executive of JPMorgan Chase & Co., describing the current economic challenge as a "hurricane" down the road and urging the Fed to take measures to prevent the economy from falling into a recession.

In Seoul, most large-cap stocks closed the session lower, led by shipping and construction firms.

Leading container shipper HMM slumped 4.93 percent to 30,850 won. CJ Logistics also sank 3.09 percent to 125,500 won. Top builder Hyundai Engineering & Construction dipped 3.12 percent to 41,950 won.

Top-cap Samsung Electronics fell 1.04 percent to 66,700 won, with chip giant SK hynix losing 0.93 percent to 107,000 won.

Among the gainers were internet portal operator Naver that rose 0.69 percent to 290,000 won and POSCO Chemical closing up 3.45 percent to 135,000 won.

The local currency ended at 1,252.10 won against the US dollar, down 14.9 won from Tuesday's close.

South Korean stock markets were closed Wednesday for local elections. (Yonhap)