Key South Korean technology stocks Samsung Electronics and Hynix Semiconductor lost ground on Friday as the earnings outlook for the world's No.1 and 2 memory chip makers continued to worsen.

Shares in Samsung Electronics were down 4.8 percent at 807,000 won as of 1:42 a.m. EST, compared with the broader market's 1.12 percent loss.

Morgan Stanley was the day's top seller of Samsung Electronics shares, according to Korean Exchange data.

The stock market overall is hysterical right now on the latest negative global economic developments, and appetite for riskier, more cyclical plays is evaporating rapidly, said Chung Yun-sik, chief investment officer at ING Investment Management.

The technology sector is being hit the hardest, as its earnings outlook has continued to deteriorate, Chung added.

Traders said memory chip prices were on a downward trend despite market expectations of a pickup earlier this quarter.

The U.S. Philadelphia semiconductor index has tumbled 16 percent since mid-February.

Samsung Electronics' second quarter operating profit is forecast to be around 4 trillion won ($3.66 billion), Thomson Reuters I/B/E/S data showed, compared to 5 trillion won a year ago.

Analysts said earnings expectations were being further downgraded.

We recently lowered our second quarter operating profit forecast on Samsung Electronics to 3.6 trillion won, said Jin Seong-hye, an analyst at Hyundai Securities.

Hynix Semiconductor Inc shares slid 6.45 percent to 28,300 won, after local brokerage Korea Investment & Securities on Friday lowered its 12-month target price on Hynix to 39,000 from the previous 42,000 won.

The world's No.2 memory chip maker is seen posting a 553.28 billion won operating profit for the quarter ending in June, according to Thomson Reuters' I/B/E/S, compared with a 1 trillion won operating profit a year earlier.

I cut my consensus forecast (for Hynix's second-quarter earnings) to 420 billion won, but I am also hearing talk in the market of 360 billion won, said James Song, an analyst at HI Investment & Securities.

(Reporting by Jungyoun Park; Editing by Jonathan Hopfner)