SEOUL, Jan. 23 (Xinhua) -- South Korean shares fell on Wednesday after rising earlier on Wall Street gains as foreign investors turned into net sellers after the Japanese yen weakened against the U.S. dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) declined 16.11 points, or 0.81 percent, to close at 1,980.41. Trading volume stood at 485.8 million shares worth 4.13 trillion won (3.87 billion U.S. dollars).
Market bellwether Samsung Electronics declined 0.5 percent as the yen fell versus the dollar following Bank of Japan (BOJ)'s decision to raise its inflation target to 2 percent and the announcement of open-ended asset buying plan starting April 2014. Top automaker Hyundai Motor gained 1.5 percent on views that the yen's ascent to the dollar slowed.
After staying in positive territory on Wall Street gains overnight, the KOSPI turned into negative territory as foreigners shifted into net sellers later in the trading. Foreign investors sold local stocks worth 4.8 billion won, triggering program-linked sales worth 190.5 billion won.
Local institutions offloaded a net 95.4 billion won worth of stocks as demand for redemption of mutual funds increased after the KOSPI rose above the 2,000-point level earlier. Retail investors bought shares worth 117.4 billion won, keeping its buying streak for three straight sessions.
Concerns over weaker yen continued to weigh on the market. BOJ set on Tuesday its inflation target at 2 percent, a 1 percentage point higher than before, while unveiling its plan to buy 13 trillion yen (145 billion dollars) a month in extra asset purchases starting January 2014.
South Korean Finance Minister Bahk Jae-wan cautioned over the BOJ's expansionary monetary policy, saying that such policy would cause costs through various channels such as higher government bond yields from the long-term perspective.
Bahk noted that the country is ready to tackle the won's ascent, saying that preparations for additional market stabilization measures have been completed. His comments indicated that another measure would come in the foreseeable future following tighter regulations on foreign exchange forward positions in November 2012.
After Bahk's comments, the South Korean won reversed its upward movement. The local currency closed at 1,066.2 won per dollar, down 3.9 won from the previous session.
South Korea has raised its worrying voice over side effects from stronger won as the accelerating won's ascent will damp the export-driven economy. The finance ministry said in a report that the won's appreciation against the dollar will cause worsening profitability of export companies in the short term, while weakening export competitiveness amid higher export prices in the long run.
The won rallied 7.58 percent versus the greenback in 2012 due to quantitative easing by central banks in major economies and the relatively solid fundamentals of the country. The local currency surged almost 20 percent to the Japanese yen as expectations for expansionary monetary policy spread under the new government in Japan.
Bond prices ended higher. The yield on the liquid three-year treasury notes lost 0.01 percentage point to 2.72 percent, but the return on the benchmark five-year government bonds fell 0.01 percentage point to 2.83 percent.