Seoul shares dropped 1.3 percent on Friday as Korea Exchange Bank slumped after its majority shareholder sold a stake at a discount, while other lenders fell on expectations a planned sale of the bank would be delayed.
After setting its latest record just on Tuesday, a rally in the KOSPI appears to be running out of steam due to concerns about the pace of gains that has propelled South Korea's main index 23.5 percent higher in just six months. The main index fell 0.07 percent this week, ending a record run of 15 consecutive weekly gains.
A number of warnings from government officials this week, including President Roh Moo-hyun, about the increase in the volume of trades being done on credit by retail investors is leading to speculation regulations could be tightened. "We could be entering a period of correction," said Kim Joon-kie, an analyst at SK Securities.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 1.30 percent to end at 1,770.98 points. The index had broken above 1,800 points for the first time on Monday, but fell below that level on Wednesday. The year's gains had been accompanied by a surge in buying by retail investors, who ended up purchasing a net 144.4 billion won ($155.7 million) on Friday, according to data at 0610 GMT, bringing their total this year to $2.05 billion.
Combined trading value in the KOSPI and the junior Kosdaq market reached a record 12.8 trillion won on Wednesday. Korea Exchange Bank (KEB) dropped 3.42 percent to 14,100 won after majority shareholder Lone Star sold 87.7 million shares, or a 13.6 percent stake, in the lender at a 6.8 percent discount to its Thursday's closing price.
Kookmin Bank fell 3.98 percent to 84,500 won. Lone Star last year aborted a $7.3 billion deal to sell KEB to South Korea's biggest lender due to a legal dispute with regulators. Brokerages dropped amid worries that the government will impose restrictions on margin loans - or borrowing money from brokerages to trade - hitting an important source of revenue in the sector.