[SEOUL] The Korea Composite Stock Price Index (Kospi) was down 1.4 per cent at 1,959.56 points, the lowest since Feb 17. Losers outnumbered gainers 5.7 to 1.
"Increased uncertainties over Chinese yuan after today's news from China prompted investors to avoid betting on riskier assets," said Park Seok-hyun, an analyst at Eugene Investment & Securities.
Domestic car makers jumped on expectations for higher exports due to a weak won.
Market bellwether Hyundai Motor Co Ltd rose 6.1 per cent while its affiliate Kia Motors Corp jumped 6.4 per cent. Shares of Ssangyong Motor Co Ltd were up 4.1 percent.
The main board was pulled down by companies that rely on Chinese tourists and Chinese domestic consumption.
Hotel Shilla Co lost 5.6 per cent and Hanatour Service Inc fell 9.9 per cent.
Amorepacific Corp, a maker of cosmetic products popular with Chinese tourists, dropped 9 per cent while snack maker Orion Corp slid 8.3 per cent.
Foreigners sold a net 63.3 billion won (S$74.99 million) of Kospi shares by midday, and were on track to be net sellers for a sixth straight session.
September futures on three-year treasury bonds were up 0.11 point at 109.47.