By Seo Jee-yeon
Staff Reporter

Seoul stock prices closed sharply lower for the second day as foreign investors massively sold electronic and financial stocks, with investor sentiment undercut by overnight Wall Street falls, dealers said.
The benchmark Korea Composite Stock Price Index (KOSPI) Wednesday sank 2.64 percent or 36.67 points to close at 1,352.91. The index fell to as low as 1,333.75 at one point before recovering some ground late in the session.

It was the biggest daily fall since Oct. 19, 2005, when the KOSPI slid 2.8 percent.

The tech-heavy Kosdaq market also nose-dived, with the Kosdaq index falling as much as 4.2 percent or 31.02 points to end at 708.08.

Dealers said Intel Corp’s weaker-than-expected quarterly results on Wall Street weighed down on the local bourse, weakening sentiment in Samsung Electronics and other electronic stocks.

``Foreign investors massively sold stocks to take profits. But the biggest drag is the accumulated fatigue by the continued record-breaking rally since last November,’’ Kim Joong-hyun, an analyst of Goodmorning Shinhan Securities said.

Foreign investors were net sellers of stocks worth 312 billion won, the largest net selling in three months.

``The foreign selling to cash in on recent gains was expected amid the strong stock rally for more than two months,’’ Kim said. ``We may have to see a further correction for a while.’’

Adding to the downward pressure were rumors that the government plans to slap taxes on capital gains from stock transactions.

Finance and Economy Minister Han Duck-soo Wednesday rejected the rumor. He told reporters that the government has no plan to introduce taxes on stock investment gains.

Analysts also remained skeptical about the early introduction of the taxation system.

``It is unlikely for the government to rush the introduction of the system at a time when indirect stock investment via mutual funds are beginning to take shape,’’ Hanwha Securities analyst Seo Bo-ik said.

The won closed at 990.50 against the dollar on Wednesday.

jyseo@koreatimes.co.kr