South Korean stocks are expected to extend their bearish mode this week as investors will likely take a cautious approach, weighed by policy uncertainties in the U.S. and Japan, analysts said.

The benchmark Korea Composite Stock Price Index declined 3.27 percent to close at 1,921.71 last Friday, the lowest since Oct. 16.

The yen’s steep descent against the U.S. dollar has put downward pressure on the main index, with shares of major automakers losing ground as they are most affected by currency volatility.

The KOSPI continued its losing binge later in the week after China announced stiffer rules on bonds qualifying for repo borrowing to curb excessive leveraging.

The dim outlook from OPEC for reduced oil demand next year also unnerved investor sentiment with fear that deflation may be looming.

This week, such downside factors won’t likely ebb away, analysts said, noting that investors will fix their wary eyes on the slew of upcoming policy-setting events in major economies.

The U.S. Federal Open Market Committee is due to hold their monetary policy meeting, with markets to watch closely on whether the Fed will tweak its words on keeping the expansionary stance “for a considerable time.”

“There’s a possibility that the Fed may revise some phrases in relation to the stimulus. But low inflation will stop it from raising the key interest rate at least until the second quarter (of next year),” said Noh Aram, an analyst at Daewoo Securities Co.

Japan holds a lower house election Sunday. The coalition led by Prime Minister Shinzo Abe is widely expected to win, which will likely further accelerate the yen’s weakness and adversely impact local stocks, Noh added.

China and Europe will release their manufacturing data, with the U.S. to announce its December housing index that will help gauge its economic strength.

Foreign investors were net sellers of local equities last week, worth 751.4 billion won ($681.2 million), while retail investors and institutions scooped up a net 355.4 billion won and 278.8 billion won each.

Builders were among the biggest decliners, falling 6.7 percent, followed by chemical companies with a 4.9 percent drop and foodmakers with 4.7 percent. (Yonhap)