(Adds prices, analyst comments)
By Song Jung-a
SEOUL, July 30 (Reuters) - South Korean shares closed lower on Wednesday as Kookmin Bank and credit card firms slumped after Morgan Stanley lowered its target prices on them, saying it expected greater write-offs.
"Foreign investors dumped financial shares in late trade, pulling down the main index," said Kim Young-min, a fund manager at Dongwon Investment Trust Management.
"They've been waiting for a chance to take profits and the Morgan Stanley report provided a catalyst," he said.
The financial sub-index slumped 3.78 percent, pushing the benchmark Korea Composite Stock Price Index (KOSPI) 1.13 percent lower to 714.15.
Kookmin , the country's top lender, sank 5.6 percent to 39,000 won.
Morgan Stanley cut its forecast for Kookmin's 2003 and 2004 earnings per share by 72 percent and 44 percent, respectively, citing increasing write-offs of credit card receivables and loans to small companies.
It also slashed Kookmin's target price to 33,000 won, implying 20 percent downside risk.
"We are bearish on S.Korea financial services," Morgan Stanley said in a report. "Some Korean credit card companies are not even half way to writing off risky multi-card users."
LG Card Co Ltd , the country's top credit card firm, fell 9.5 percent to 20,000 won.
KEB Credit dropped 10.1 percent to 7,210 won and Kookmin Credit Card shed six percent, ending at 17,150 won.
Retail investors sold a net 87 billion won worth of shares, offsetting some programme buying by local institutions.
Steel giant POSCO Co slid 3.1 percent to 140,500 won, pushing the iron and steel index 2.52 percent lower.
LG Electronics Inc , the country's leading home appliance maker, sank 3.21 percent to 51,300 won.
Hyundai Motor Co Ltd fell 1.71 percent to 34,500 won.
Bucking the trend, Hynix Semiconductor Inc , the world's third-largest chip maker, jumped 5.23 percent to 7,440 won in heavy trade, after a 5.5 percent drop a day earlier.
The over-the-counter Kosdaq finished down 1.3 percent at 49.47.
LG Telecom Inc , South Korea's smallest mobile carrier, dropped 2.69 percent to 3,980 won on disappointing quarterly results and unclear earnings outlook.