U.S. Internet firm Yahoo Inc. is buying a 10 percent stake in South Korea's No.2 online retailer Gmarket, giving it a foothold in one of Asia's fastest-growing e-commerce industries.

The deal is Yahoo's latest investment in online retail firms in Asia, and puts it in head-on competition with eBay Inc. in South Korea's $11 billion online retail market, which the U.S. auction giant has long dominated.

Yahoo, the world's largest Internet media company, said in a statement on Wednesday it had agreed to buy the stake from U.S. venture capital firm Oak Investment Partners, the second-largest shareholder in Gmarket with 29 percent.

The announcement came after Gmarket applied for a Nasdaq initial public offering worth up to $100 million early on Wednesday, betting on a revival of consumer spending in South Korea.

"Gmarket is fast catching up with eBay, and it seems to be on track to rise to the top position as early as this year," said Lee Sang-koo, an analyst at Hyundai Securities.

"EBay may see competition from a growing number of rivals hurt its market share, while Gmarket will be able to take advantage of Yahoo's media platform as well as advance its efforts to expand overseas."

Gmarket could not confirm the value of the deal, while Oak and Yahoo were not immediately available for comment.

South Korean Internet portal operator Interpark Corp. owns the biggest shareholding with a 33.74 percent stake in Gmarket, while Interpark chairman Lee Ki-hyung holds 10.27 percent. Interpark is also the third-biggest player in the online retail market.

"We look forward to working with Gmarket to leverage their e-commerce expertise to further expand Yahoo's leading position in commerce in Asia," Yahoo chief operating officer Dan Rosensweig said in a statement.

SOUTH KOREA MARKET CRUCIAL

Despite the recent U.S. advertising and e-commerce alliance between Yahoo and eBay to battle Google Inc., the two U.S. rivals are still locked in a fierce competition in Asia, where sheer population numbers, growing spending power and rising broadband penetration rates promise higher growth.

The alliance announced last week makes Yahoo the sole provider of online banners and other graphic advertising on eBay, in return for promoting eBay's online payment system.

South Korea, which boasts of the world's highest broadband penetration rate, is a crucial market for global players; eBay's South Korea business, Internet Auction, is the firm's fourth-largest market in the world and yields over three-quarters of its Asian revenue.

Deustche Bank forecast in a May report the country's e-commerce market would expand to $20 billion in 2010, growing over 20 percent every year and therefore attracting greater competition in the next few years.

Gmarket, which sells products from computers to T-shirts through its Web site, posted a net profit of 4.3 billion won ($4.56 million) in 2005 on sales of 71.3 billion won after overseeing 1 trillion won worth of trading.

Interpark, the biggest shareholder, estimates Gmarket's net profit will rise to 15 billion won this year.