* Offshore investors continue to sell on emerging market fears
* Large-caps such as Naver Corp, Samsung SDI tumble
* Hyundai Merchant Marine bucks market, soars on N.Korea proposal
By Jungmin Jang
SEOUL, Jan 27 Seoul shares slumped to a 5-month low on Monday morning, as concerns mounted over a continued flight of capital from emerging markets amid tighter credit conditions in China and expectations of a further reduction in U.S. stimulus.
The Korea Composite Stock Price Index (KOSPI) was down 1.7 percent at 1,906.83 points as of 0130 GMT after touching an intraday low of 1,899.76, its lowest level since Aug. 29.
"Investor concerns over the selloff in emerging markets has overwhelmed the market here," said Han Beom-ho, an analyst at Shinhan Investment & Securities. "Our market has already been hit by weak corporate earnings, so people are cautious," he said.
Emerging market assets were hit by worries about slowing growth in China as well as political problems in Turkey, Argentina and Ukraine.
Expectations the U.S. Federal Reserve will further scale back its stimulus have also hurt sentiment.
In the two-day policy meeting scheduled from Tuesday to Wednesday, the Fed is expected to cut an additional $10 billion in its bond-purchasing stimulus programme. This has led to a shift of funds from emerging markets to the United States as investors seek higher returns from rising Treasury yields.
With credit conditions getting tighter in China, investors fret that a flight of capital from emerging markets will hurt those economies and undermine global growth.
As of last Friday, foreigners have sold a net 837.2 billion won ($774.9 million) worth of KOSPI shares this year, which has led to the main index falling more than 3.5 percent so far in the year.
On Monday morning, foreigners offloaded a net 169.5 billion worth of local shares.
Big-names such as the country's largest search portal operator Naver Corp and secondary battery supplier Samsung SDI Co Ltd were among the leading decliners, dropping 2.5 percent and 4 percent, respectively.
Companies that reported lacklustre earnings also attracted sellers. Index-heavyweight Samsung Electronics Co Ltd slipped 1.5 percent and Daelim Industrial Co Ltd fell 2.8 percent.
All but one of the sub-indexes on the Korea Exchange (KRX) traded in the red.
The transportation sector bucked the market by edging up 0.7 percent on the back of Hyundai Merchant Marine Co Ltd, which jumped 10.7 percent after Northdae Korea on Friday proposed reunions of families separated since the Korean War.
Hyundai Merchant Marine is an affiliate of unlisted conglomerate Hyundai Group, which had operated the shuttered tourism projects in North Korea since 2008.
Decliners outnumbered advancers 730 to 77.
The KOSPI 200 benchmark of core stocks was down 1.7 percent, while the junior KOSDAQ shed 2 percent. ($1 = 1080.3500 Korean won) (Reporting by Jungmin Jang; Editing by Shri Navaratnam)