* Institutional selling the biggest in over 3 months
* Steelmakers lose ground on Fed concerns, hedge fund talk
* Tyre makers rally on rubber prices plunge, demand recovery hope
By Hyunjoo Jin
SEOUL, Feb 21 (Reuters) - South Korean shares snapped a six-day gain on Thursday, dragged by the largest institutional sales in more than three months, as worries about the durability of the U.S. Federal Reserve stimulus programme hit risk sentiment.
Steelmakers were the biggest losers as commodity stocks were, in addition, hit by market talk of a hedge fund liquidating positions.
The Korea Composite Stock Price Index (KOSPI) finished down 0.47 percent at 2,015.22 points.
Institutional investors dumped a net 263.2 billion Korean won ($244.08 million) worth of shares on the KOSPI, the biggest amount since Nov. 8, according to Korea Exchange data. But foreign investors continued to snap up KOSPI shares, underpinning the market.
"The KOSPI will remain at around the 2,000-point level, as its global peers are going through a technical pullback from recent rallies," said Oh Hyun-seok, an analyst at Samsung Securities.
U.S. stocks lost ground overnight after minutes from the Fed's January meeting showed many officials worrying over the potential cost of more asset purchases, suggesting that the central bank may slow down its buying or even stop, sooner than expected.
"It is not that the Fed decided to end its 'quantitative easing', but that there was a debate over the policy. But this served as an excuse for U.S. investors to take profits after recent Wall Street rallies," said Cho Byeong-hyun, an analyst at Tong Yang Securities.
South Korea's top steelmaker POSCO went down 1.8 percent, while Hyundai Steel lost 1.7 percent.
The plunge in commodities prices was a boon to tyre makers, which use rubber as a key material.
Shares of South Korean tyre makers rallied, also because market data from France's Michelin strengthened expectations of a demand recovery in the United States.
Nexen Tire rallied 7.3 percent, Kumho Tire gained 5.5 percent and Hankook Tire inched up 0.5 percent.
Among the index heavyweights, Samsung Electronics advanced 0.3 percent, while Hyundai Motor fell 0.5 percent.
Hyundai Elevator tumbled 6.3 percent to 87,000 Korean won ($81.14) after the unit of Hyundai Group announced a plan to issue new stocks at 69,300 won per share, a 25 percent discount to Wednesday's closing price.
Kumho Investment Bank hit the daily limit of 15 percent, after Daewoo Securities said it was considering a bid in the financial firm.
Move on day -0.47 percent
12-month high 2,057.28 14 March 2012
12-month low 1,769.31 25 July 2012
Change on yr +0.91 percent
All-time high 2,231.47 27 April 2011
All-time low 93.10 6 January 1981 ($1 = 1078.3500 Korean won) (Editing by Sanjeev Miglani)