South Korea's KOSPI fell more than 1 percent on Thursday on joint selling by foreigners and institutions, sliding to the 6,900 level. Caution ahead of the release of the U.S. August consumer price index (CPI) and weakness in large semiconductor shares such as Samsung Electronics and SK Hynix pulled the index lower.

The KOSPI closed down 124.01 points, or 1.76 percent, at 6,909.91. The index opened down 231.42 points, or 3.29 percent, at 6,802.50. It slid to the 6,800 level early in the session before trimming losses, but it did not regain 7,000.

In the main board market, foreigners net sold 2.2915 trillion won and institutions net sold 1.2235 trillion won. Retail investors net bought 1.8658 trillion won, absorbing the selling.

Semiconductor stocks that had led recent gains fell across the board. Samsung Electronics closed down 3.53 percent at 259,500 won and SK Hynix fell 2.21 percent to 1,812,000 won.

Other top market-cap stocks also mostly weakened, including SK Square, down 4.05 percent, LG Energy Solution, down 1.37 percent, Hyundai Motor, down 1.67 percent, Samsung Biologics, down 0.56 percent, and Samsung Life Insurance, down 0.65 percent. Samsung Electro-Mechanics finished flat.

KB Financial rose 2.60 percent to close at 177,900 won, standing out among the top stocks.

The KOSDAQ also ended lower. The index fell 16.28 points, or 1.95 percent, to 820.64.

In the Seoul foreign exchange market, the won-dollar exchange rate stood at 1,346.50 won.

The market came under pressure from caution ahead of the U.S. August CPI release and burdens from rising interest rates and oil prices, weighing on investor sentiment. Profit-taking also appeared to have continued, centered on semiconductor stocks that surged in a short period after the KOSPI moved above 7,000 recently.

Han Ji-young (한지영), a researcher at Kiwoom Securities, said short-term volatility could increase through next week depending on the August CPI result. She said it was necessary to watch whether a rotation continues into construction and materials, machinery, power equipment, nuclear power and small- and mid-cap stocks.