South Korean stocks closed 0.22 percent lower Friday as investors sat on the sidelines due to jitters over the listed firms' second quarter earnings, analysts said. The local currency gained against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 4.07 points to close at 1,871.41. Trading volume was moderate at 315 million shares worth 3.54 trillion won (US$3.16 billion), with gainers outpacing losers 418 to 378.

"Seoul shares traded flat despite that the U.S. stock market gathered ground on improved economic data, as Google Inc. and Microsoft Corp. posted worse-than-expected earnings for the second quarter," said Lim Soo-kyun, a researcher at Samsung Securities Co.

U.S. stocks closed higher Thursday on improved jobs data with the Dow Jones industrial average adding 0.5 percent and tech-laden NASDAQ composite index advancing 0.04 percent. Google and Microsoft's second-quarter earnings were released after the markets were closed.

"Investors will maintain their wait-and-see approach until South Korean listed firms' second-quarter earnings are released next week," Lim added.

Kim Sun-young, a researcher at IBK Investment & Securities Co., echoed the view, adding the weak Japanese yen is also anticipated to continue weighing down on the market. The weak yen inflicts foreign exchange losses on South Korean exporters under competition with Japanese firms.

Foreign investors offloaded a net 128.5 billion won. In contrast, retail investors and institutions scooped up a net 25 billion won and 92.3 billion won, respectively.

Tech shares lost ground, with market behemoth Samsung Electronics losing 1.47 percent to 1,273,000 won and chipmaker SK hynix decreasing 2.74 percent to 28,400 won. Flat panel maker LG Display shed 1.3 percent to 26,600 won.

Builders traded lower, with Hyundai Engineering & Construction falling 2.63 percent to 55,500 won and Daewoo Engineering & Construction moving down 0.71 percent to 7,000 won. Daelim Industrial shed 1.22 percent to 80,700 won.

Logistics firms also closed bearish, with Hyundai Glovis losing 0.26 percent to 189,000 won and top air carrier Korean Air decreasing 1.16 percent to 29,750 won. CJ Korea Express lost 1.58 percent to 93,500 won.

In contrast, carmakers traded higher, with top player Hyundai Motor adding 0.23 percent to 221,500 won and auto parts maker Hyundai Mobis adding 1.36 percent to 260,000 won.

The local currency ended at 1,121.70 won against the greenback, up 4.60 won from Thursday's close, as investors' appetite for riskier assets rose, dealers said.

Bond prices, which move inversely to yields, closed mixed. The yield on three-year Treasuries remained unchanged at 2.85 percent and the return on the benchmark five-year government bonds fell 0.01 percentage point to 3.1 percent. (Yonhap News)