South Korean shares plunged to the lowest in five months on Friday as foreign investors continued to dump local shares amid intensified fears that Greece may exit the euro zone.

The benchmark Korea Composite Stock Price Index (KOSPI) plunged 62.78 points, or 3.4 percent, to close at 1,782.46. The figure was the lowest since December 19 last year. Trading volume stood at 539.56 million shares worth 5.65 trillion won (4.82 billion U.S. dollars).

The KOSPI started sharply lower, and extended its earlier losses throughout the session. The key index suffered its seventh loss in the latest 8 trading sessions.

Political turmoil in Greece continued to haunt market sentiment. Global credit rating agency Fitch downgraded Greece's rating by one notch to CCC, the lowest possible grade for a country that is not in default, warning of a probable Greek exit from the euro zone.

Shortly after that, Moody's cut the long-term debt and deposit ratings for 16 Spanish banks and Santander UK, which is a Britain- domiciled subsidiary of Banco Santander, as the banks' credit conditions worsened and the government's ability to support the banks reduced.

Fears over bank run in Spain also spread. A report showed that customers at Bankia, the fourth largest bank nationalized by the Spanish government last week, had withdrawn more than 1 billion euros from their accounts since last Wednesday.

"Investors viewed the European situation negatively, which led to higher volatilities in the local stock market. The extremely possible scenario that Greece may be forced out of the euro zone boosted market fears over the short run," Kang Hyun-gie, a strategist at Solomon Investment & Securities in Seoul, told Xinhua.

Kang, however, noted that the KOSPI's further decline was expected to be limited down the road as negative factors from Europe have long been exposed to the market and various barriers to prevent the crisis from spreading further were already established.

The strategist said that public opinion in Greece asked the politicians to re-negotiate the austerity plans in a less tightened direction, adding that Greek people do not want to exit from the euro zone.

Foreign investors led the market decline. Foreigners dumped a net 434.6 billion won worth of local stocks, keeping their selling spree for 13 straight sessions. They offloaded a total of around 3 trillion won over the past 13 sessions.

Retail and institutional investors bought shares, but failed to stop the KOSPI from falling further. Local institutions bought a net 146.1 billion won worth of stocks, and retail investors purchased shares worth 285.6 billion won.

All industry groups lost ground. Market bellwether Samsung Electronics dropped 4.66 percent to 1,166,000 won, and consumer electronics giant LG Electronics slid 3.3 percent to 64,400 won.

Top automaker Hyundai Motor tumbled 4.78 percent to 229,000 won, and its affiliate Kia Motors plunged 5.66 percent to 73,300 won.

The local currency finished at 1,172.8 won against the greenback, down 9.9 won from Thursday's close.

Bond prices ended higher. The yield on the liquid three-year treasury notes lost 0.03 percentage point to 3.36 percent, and the return on the benchmark five-year government bonds fell 0.03 percentage point to 3.47 percent.