Korean stocks slid 1.04 percent on Tuesday as investor sentiment was muted after Standard & Poor's said it may downgrade the credit ratings of 15 eurozone countries, analysts said. The local currency fell against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) lost 20.08 points to 1,902.82. Trading volume was moderate at 379.3 million shares worth 4.58 trillion won ($4.04 billion) with losers outnumbering gainers 579 to 252.

"The threat of a downgrade made investors reluctant to increase risky assets ahead of a European summit meeting on Friday," said Oh On-su, a market analyst at Hyundai Securities Co.

Standard & Poor's placed the ratings of 15 eurozone countries, including top-rated Germany and France, "on credit watch negative," a move that signals a possible downgrade within three months.

The warning erased optimism about Europe's efforts to stem the spread of its debt crisis after the leaders of France and Germany called for a new treaty to impose greater fiscal discipline on European countries.

"The market responded sensitively to European issues. Investors will take a wait-and-see attitude to see what Friday's meeting will bring about," Oh said.

The Bank of Korea said earlier in the day that the South Korean economy grew a revised 0.8 percent in the third quarter from three months earlier, slightly faster than a previous estimate of 0.7 percent. But the outlook for the Asia's fourth-largest economy is not so bright as domestic demand remained sluggish and outweighed sustained exports.

Foreigners led the decline, offloading a net 156.7 billion won of local shares, while institutions bought a net 268.2 billion won.
The loss was broad-based, with heavy-weight blue chips steelmakers among the top losers.

Market behemoth Samsung Electronics tumbled 2.06 percent to 1,044,000 won and its smaller rival Hynix Semiconductor dropped 2.15 percent to close at 22,750 won.

Leading steelmaker POSCO shed 0.63 percent to 392,000 won after an outlook downgrade by Fitch Ratings, and Hyundai Steel lost 2.39 percent to finish at 102,000 won.

Financials closed bearish on Europe's deepening debt woes, with Shinhan Financial Group falling 2,56 percent to 41,800 won and Woori Finance Holdings down 2.4 percent to 10,150 won.

The local currency closed at 1,131.2 won, down 1.4 won from Monday's close, as foreign investors unloaded local stocks, dealers said.

Bond prices, which move inversely to yields, closed mixed. The yield on three-year Treasuries fell 0.04 percentage point to 3.34 percent and the return on the benchmark five-year government bonds rose 0.01 percentage point to 3.50 percent. (Yonhap)