South Korean stocks closed almost flat Thursday amid caution ahead of US inflation data due later this week and concerns the stock markets may be "highly valued." The Korean won was trading lower against the US dollar.

The benchmark Korea Composite Stock Price Index lost 1.03 points, or 0.03 percent, to close at 3,471.11.

Trade volume was moderate at 289 million shares worth 12.4 trillion won ($8.9 billion), with losers outnumbering winners 533 to 335.

Retail investors unloaded local shares worth 541 billion won for profit taking, while foreigners and institutions purchased 184.5 billion won and 268.7 billion won, respectively.

Overnight, Wall Street finished lower following recent gains, after Federal Reserve Chair Jerome Powell said "equity prices are fairly highly valued" and the Fed is watching the impact of its policies on the overall financial conditions.

He also said the United States is seeing "unusually large" amounts of economic activity through the artificial intelligence build-out, sparking concerns over an AI bubble.

"With the global AI momentum and tailwinds from the semiconductor industry, which had driven the Kospi's recent rally, passing a short-term peak, the index is now showing clear signs of a breather," said Lee Kyoung-min, an analyst at Daishin Securities.

Lee noted uncertainties rose ahead of the planned release of the US Personal Consumption Expenditures Price Index, a key gauge of inflation, on Friday and amid ongoing trade negotiations between Seoul and Washington.

Investors were also paying attention to the recent weakness of the Korean won, which slumped to a 2-month low against the US dollar.

In Seoul, market bellwether Samsung Electronics rose 0.82 percent to 86,100 won, while its chipmaking rival SK hynix lost 0.28 percent to 356,500 won.

Leading battery maker LG Energy Solution soared 3.88 percent to 361,500 won and its smaller rival Posco Future M jumped 5.42 percent to 145,900 won.

Internet portal operator Naver shot up 11.4 percent to 254,000 won on news the company is pushing to acquire Dunamu Inc., the operator of South Korea's largest cryptocurrency exchange, as a wholly owned subsidiary as part of its push to expand into the digital finance sector.

Kakao, the operator of the country's top mobile messenger, also increased 0.64 percent to 63,200 won.

On the other hand, bio giant Samsung Biologics dipped 2.29 percent to 1.02 million won and power plant manufacturer Doosan Enerbility slipped 2.88 percent to 64,000 won.

AI investment firm SK Square shrank 2.99 percent to 211,000 won.

Defense firms also lost ground, with industry leader Hanwha Aerospace down 0.95 percent to 1.05 million won and Hyundai Rotem dropping 4.17 percent to 218,500 won.

The local currency was quoted at 1,400.6 won against the greenback at 3:30 p.m., down 3.1 won from the previous session. (Yonhap)

Seoul shares end nearly flat on planned US inflation data, Fed chair's remarks