South Korean stocks declined 0.39 percent Tuesday dented by large-cap tech losses, while investors keep a wary eye ahead of a crucial U.S. monetary meeting and a long holiday in Seoul, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) closed down 7.79 points to 2,005.58. Trading volume was light at 256.6 million shares worth 4.19 trillion won (US$3.86 billion), but gainers outstripped losers 422 to 377.

The main bourse snapped its gains from the previous session, moving in line with analysts' predictions that investors would likely stay on the sidelines ahead of the Chuseok holiday, or the national harvest celebration, beginning on Sept. 18 for three days.

"Investors chose to hold back a little ahead of Chuseok and the U.S. FOMC meeting slated for the 18th, while external risks that might further undermine stocks like Syria have eased," said Kim Soon-young, an analyst at IBK Investment & Securities Co.

Analysts here forecast the Fed's tapering issue won't be much of a concern to the local market since it is clear the Fed will stick to a gradual cut in the bond purchases.

It is largely expected the Fed will start reducing the stimulus by $10-15 billion per month.

Institutions led the market with a net selloff worth 332.6 billion won, while foreigners continued to scoop up local shares worth a net 387.7 billion won, capping the KOSPI's fall.

Tech and telecom blue-chips drove down the shares. Top-cap Samsung Electronics dropped 2.74 percent to 1,386,000 won, with No. 1 mobile carrier SK Telecom losing 2.74 percent to 213,000 won.

In contrast, automakers and shipbuilders gathered ground, with Hyundai Motor rising 0.39 percent to 256,000 won and Hyundai Heavy Industries finishing up 1.56 percent to 260,500 won.

The local currency ended at 1,084.10 won against the greenback, down 1.9 won from Monday's close, mainly due to a rise in demand for the dollar, dealers said.

The Seoul bourse will be closed for the rest of the week for the Chuseok holiday.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasuries edged down 0.02 percentage point to 2.85 percent and the return on the benchmark five-year government bonds fell 0.04 percentage point to 3.11 percent. (Yonhap News)