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KOSPI tumbles to 2-year low on China stock rout, won dips for 2nd day

China's stock market rout sent South Korean shares plummeting to the lowest level in two years on Monday with foreign sell-offs of Korean stocks hitting a yearly high, analysts said. The local currency extended its loss against the U.S. dollar for a second consecutive day.

The benchmark Korea Composite Stock Price Index slumped 46.26 points, or 2.47 percent, to 1,829.81. Trading volume was moderate at 410 million shares worth 6.1 trillion won (US$5.1 billion), with decliners dwarfing gainers 631 to 194.

The Monday closing marks the lowest level for the KOSPI, since closing at 1,824.16 on July 10, 2013.

Dizzying drops in global equity markets pummeled investor sentiment. As concerns over growth in China persist, the Dow Jones industrial average tumbled more than 3 percent on Friday and China's main index dived as much as 8.7 percent on Monday.  

"Market sensitivity over Chinese risks is expected to rise, mostly due to signs of worsening economic fundamentals," said Kim Seong-hwan, an analyst at Bookook Securities Co., citing weaker-than-expected manufacturing data from China.

In Seoul, retail investors and institutions snapped up shares, but foreigners continued to sell, extending their net selling mode to a 14th straight session.

Some analysts, however, said the KOSPI has bottomed and is likely to start gradually gaining.

"It seems the market is in the last stage of panic selling, where the index is easily affected by the smallest factors. Albeit small, there are improvements in China's leading composite index, and the market is likely to stabilize after passing through this panic phase," said Kang Hyun-gie, an analyst at Dongbu Securities Co.

Shares tumbled across the board, with market heavyweights Samsung Electronics falling 2 percent to 1,079,000 won and Hyundai Motor losing 2.4 percent to 142,500 won.

Other market heavyweights also tumbled sharply with top automaker Hyundai Motor losing 2.4 percent to end at 142,500 won, and Shinhan Financial Group, the country's largest financial group by market cap, falling 4.17 percent to finish at 40,250 won.

In contrast, Hyundai Merchant Marine spiked 29.94 percent, its daily limit, to 6,510 won as high-level talks between Seoul and Pyongyang is in its third day. The company is the biggest shareholder of Hyundai Asan, which operates now-suspended joint tours connecting South Korea and the Mount Kumkang in North Korea.

The tours have been suspended since 2008 following the fatal shooting of a South Korean tourist by a North Korean soldier at the resort.

The South Korean won continued to lose ground against the U.S. dollar for a second straight session to reach a five-year low, amid reduced appetites for risky assets stemming from increased geopolitical risks and global economic uncertainties.

The local currency closed at 1,199.00 to the greenback, down 4 won, or 0.33 percent, from the previous session's close, marking the lowest level in almost five years.

Right after the market opened, the local currency briefly dipped below the psychologically important 1,200-won level.

The won has been under selling pressure due to worries over China's economic slowdown, coupled with the ongoing tension on the peninsula, which has triggered massive outflows from emerging markets.

"Fears over a slowdown in the global economy and rising inter-Korean tension are working to push up the won-dollar rate, but simmering signs of a delay in the much-coveted rate hike in the U.S. may limit the local currency's sharp tumble," Woori Futures Co. said in a research note.

China's yuan devaluations have jolted the global financial market with bets on risky assets sharply tumbling amid concerns over a slowdown in the global economy.

High-level talks between South and North Korea stretched into a third day Monday amid no clear signs of progress in defusing heightened tensions on the divided peninsula. (Yonhap)