South Korean stocks fell sharply on Friday as geopolitical risks escalated on the Korean Peninsula amid the exchange of war rhetoric between the United States and the Democratic People's Republic of Korea (DPRK).

The benchmark Korea Composite Stock Price Index (KOSPI) dropped 39.76 points, or 1.69 percent, to settle at 2,319.71. Trading volume stood at 318.84 million shares worth 6.11 trillion won (5.34 billion U.S. dollars).

The KOSPI kept a downward correction for the fourth consecutive trading session as foreigners dumped local stocks amid the rising geopolitical risks on the peninsula.

U.S. President Donald Trump warned Pyongyang that if it continues threats against the U.S. territory, it would be met with "fire and fury."

It was followed by the DPRK's warning that it could fire four intermediate-range ballistic missiles targeting the waters off the coast of Guam, the U.S. island in the Pacific.

Foreigners dumped a net 650 billion won worth of domestic stocks, marking the biggest daily stock sale by foreign investors in about two years.

Trump said overnight his "fire and fury" threat to the DPRK was not tough enough, fuelling concerns further about security situations on the peninsula.

Market watchers forecast that tensions would run high on the peninsula as the annual South Korea-U.S. war game, codenamed Ulchi Freedom Guardian, was scheduled to kick off on Aug. 21.

The DPRK has denounced the joint war game as a dress rehearsal for northward invasion.

Foreign sell-off was centered on IT shares, especially Samsung Electronics and SK Hynix, which gained ground in recent months on strong demand for semiconductors. Foreigners dumped 2.5 trillion won worth of IT stocks in the past 20 trading sessions.

Market bellwether Samsung Electronics sank 2.8 percent, and memory chip giant SK Hynix tumbled 4.7 percent. Top steelmaker POSCO declined 4.8 percent, and the biggest automaker Hyundai Motor slipped 2.1 percent.

The No.1 mobile operator SK Telecom lost 1.5 percent, and the state-run power supplier Korea Electric Power Corp. dipped 1.4 percent. Leading chemical firm LG Chem rose 0.6 percent, and the most-used search engine Naver added 0.1 percent.

South Korea's currency finished at 1,143.50 won against the greenback, down 1.50 won from the previous close.