The main index plunged as low as the 1,780 mark on Thursday after the central bank lowered its key rate for the first time in more than three years to 3.00 percent, amplifying concern over further economic downturn.
The KOSPI bounced back to the psychological support level of 1,800 on Friday, relieved by China's growth for the second quarter, which was in line with the market's expectations.
Next week, Seoul shares will likely seek to rebound, but chances for a rally will largely depend on external conditions rather than domestic issues, analysts said.
Investors will be eyeing the congressional hearings of Federal Reserve chief Ben Bernanke and a spate of U.S.-based multinational companies' earnings to be announced next week.
It is widely expected that Bernanke will not bring up the possibility of another round of quantitative easing. The earnings reports, including those from Coca-Cola Company, American Express and Microsoft, are forecast to drive stocks.
"The KOSPI won't likely fall further next week mainly because markets are discouraged enough by policies and recession woes, Foreigners and institutional investors offloaded a net 980.0 billion won (US$848.7 million), while retail investors scooped up shares worth a net 1.1 trillion won.
Most sectors traded in negative territory, with machineries slumping 6 percent, and construction and retail issues down more than 5 percent
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