South Korean shares retreated on Wednesday as foreign investors continued their selling streak amid lingering concerns over political uncertainties in Europe, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 16. 72 points, or 0.85 percent, to close at 1,950.29. Trading volume stood at 462.65 million shares worth 4.89 trillion won (4.29 billion U.S. dollars).

The KOSPI started lower on Wall Street losses overnight, and extended its earlier losses in the afternoon trading as foreigners kept their selling streak for the six consecutive session amid growing political uncertainties in Europe.

Greece's two main parties suffered huge defeat in a general election, while those opposed to more fiscal cuts winning almost 60 percent support in the election. The newly elected Greek politicians appeared unable to form a coalition government, boosting concerns that the country may fail to stick to its austerity plans.

Leading German politicians warned that Greece would not receive a cent more aid unless it fulfills all the conditions of its international bailout.

Over the weekend, Frances' Socialist candidate Francois Hollande, who was against the austerity plan, beat the current president Nicolas Sarkozy in the presidential election, underlying the growing political uncertainties in the European countries.

"The KOSPI declined on Wall Street losses overnight. The U.S. stocks trimmed their initial losses later during the trading, but the KOSPI widened its losses in the afternoon session, indicating that the market sentiment worsened," Park So-yeon, an analyst at Korea Investment & Securities in Seoul, told Xinhua.

Park noted that foreigners were net sellers both in spots and futures, saying that overseas investors maintained conservative views over the local stock market. The analyst added that there were concerns over the U.S. economic recovery as well as over the European woes.

Offshore investors kept their selling streak by offloading a net 344.5 billion won worth of local shares. They sold 3,615 contracts for the KOSPI200 index futures, indicating that foreigners still held negative views over the local stock market.

Institutional investors turned to net sellers in six sessions by offloading a net 56 billion won worth of stocks, but retail investors limited the KOSPI further decline by purchasing a net 220 billion won worth of shares.

Shipbuilding firms led the market decline. The world's largest shipyard Hyundai Heavy Industries dropped 5.1 percent to 260,500 won, and its rival Samsung Heavy Industries tumbled 5.83 percent to 37,150 won. Local shipbuilder Daewoo Shipbuilding & Marine Engineering plunged 6.13 percent to 28,350 won, and STX Offshore & Shipbuilding retreated 3.14 percent to 12,350 won.

Large-cap shares ended mixed. Market bellwether Samsung Electronics slid 0.75 percent to 1,331,000 won, and top automaker Hyundai Motor dipped 2.15 percent to 250,000 won. The nation's No. 2 carmaker Kia Motors fell 1.22 percent to 80,800 won, and leading chemical firm LG Chem slipped 3.86percent to 286,500 won.

Meanwhile, top steelmaker POSCO rose 1.45 percent to 385,000 won, and the country's biggest life insurer Samsung Life Insurance gained 0.92 percent to 98,500 won. Consumer electronics giant LG Electronics advanced 2.96 percent to 73,100 won, and Korea Electric Power, the state-run power supplier, edged up 0.43 percent to 23,500 won.

The local currency finished at 1,140.4 won against the greenback, down 4.8 won from Tuesday's close.

Bond prices ended higher. The yield on the liquid three-year treasury notes lost 0.02 percentage point to 3.37 percent, and the return on the benchmark five-year government bonds fell 0.01 percentage point to 3.49 percent.