In a widely expected move, the Bank of Korea slashed its key rate to 1.25 percent from 1.5 percent this week -- the second rate cut in three months.

"Ongoing trade tensions between the US and China, and geopolitical ... and domestic policy uncertainty, are weighing on investor and business confidence. In such a scenario, corporations are unwilling to increase capital expenditure despite low interest rates," international ratings agency Standard and Poor's said in a report.

Investors will also remain cautious next week as the BOK is set to announce data on South Korea's third-quarter economic growth on Thursday.

South Korea's economy contracted 0.4 percent in the first quarter before rebounding 1 percent in the second quarter.

Analysts have said the nation's economy must grow more than 0.6 percent each in the third and fourth quarters. If not, the local economy will fail to achieve annual growth of 2 percent this year.

On Tuesday, the BOK will release data on September producer prices.

Producer prices dropped for the second consecutive month in August, amid a steady decline in exports and sluggish spending at home. (Yonhap)