South Korean stocks declined to the lowest point in the year on Tuesday, as increasing fears on China's step to squeeze money added to fresh worries about the local economy on top of a possible end of the U.S. monetary easing, analysts said. The local currency inched up against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 18.38 points, or 1.02 percent, to close at 1,780.63. Trading volume was moderate at 326.3 million shares worth 4.40 trillion won ($3.78 billion) with losers far outnumbering gainers 755 to 110.

"The short-term market squeeze in China deals a blow to local exporters as a shortage of funds in Beijing would inevitably lead to a worsening of its economy, which will hurt our outbound shipments," Lee Jae-man, an analyst at Tong Yang Securities Co. said.

Unlike the U.S. Federal Reserve's announcement to gradually reduce its quantitative easing (QE), China has a covert system which it rarely discloses details of its policies, making market participants even more jittery, Lee added.

"Unless the Bank of China shows some sort of policy gesture at least to ease the money market, the uncertainties will likely persist for some time."

Foreigners dumped a net 135.9 billion, extending its selling spree for the 13th consecutive session. During that period, they unloaded a combined net 5.54 trillion won.

Foodmakers and machineries led the KOSPI's fall. Leading confectionery maker Orion dived 5.3 percent to 964,000 won, and heavy equipment maker Doosan Heavy Industries dipping 4 percent to 38,450 won.

Tech heavyweights finished bearish, with top-cap Samsung Electronics shedding 1.22 percent to 1,297.000 won and SK hynix losing 0.84 percent to 29,500 won.

But shares of auto and steelmakers rose. Hyundai Motor shot up

1.73 percent to 206,000 won and POSCO gained 0.17 percent to 293,000 won.

The local currency ended at 1,160.20 won against the greenback, up 1.2 won from Monday's close, as the dollar slowed its ascent, dealers said.

Bond prices, which move inversely to yields, closed sharply higher. The yield on three-year Treasuries fell 0.1 percentage point to 3.02 percent and the return on the benchmark five-year government bonds dipped 0.11 percentage point to 3.32 percent. (Yonhap News)