Seoul shares hit their highest in two months at one point on Monday as hopes for an end to US interest rate increases lifted exporters, but gains were cut late in the session as wireless operators slumped after KTF reported weak earnings.
Woori Financial Group also fell sharply despite reporting better-than-expected earnings on Friday, as investors worried about declining interest margins.
But Kookmin Bank rose 0.12 percent to 83,400 won. The country's biggest lender reported after the market's close a better-than-expected 41.4 percent rise in quarterly profit as steady lending growth and lower loan default rates offset slight margin falls.
The benchmark Korea Composite Stock Price Index (KOSPI) ended up 0.06 at 1,297.82 points, after earlier rising as much as 1.5 percent to a session high of 1,316.12, its highest intraday level since June 1.
US gross domestic product data on Friday showed expansion in the world's largest economy slowed abruptly in the second quarter, raising hopes that the Federal Reserve would end a two-year series of interest rate rises at its August 8 policy meeting.
Wall Street rallied as a result, helping the S&P 500 record its best weekly gain since November 2004. "We're bound to see a recovery in global markets if the Fed doesn't raise interest rates next week," said Kim Seong-ki, chief investment officer at SH Asset Management.
Kim added he expected a return of some of the money that has flowed out of global funds as a result of the Fed's monetary tightening campaign. "We could see an end to the selling by foreign investors, and that would be positive for us," he said.
Global markets have retreated since May amid uncertainty about the Fed's moves, with the KOSPI falling more than 11 percent from a record high on May 11 amid heavy foreign selling.
Foreign investors bought a net 104.3 billion won ($109.3 million), ending a 14-session selling streak in which they had unloaded a net $1.8 billion won in shares in the main index.
Samsung Electronics Co Ltd, the world's biggest memory chip maker, rose 1.33 percent to 608,000 won, while flat panel maker LG.Philips LCD Co Ltd gained 1.51 percent to 33,650 won.
However, KTF, South Korea's second-biggest mobile operator, slid 3.07 percent to 28,450 won after posting a worse-than-expected fall in quarterly profit due to aggressive spending on handset subsidies to win subscribers. Nomura Securities cut its share target price on KTF to 26,500 won from 28,000 won following the results.
"Though the market had expected a high level of marketing activity from illegal handset subsidies, it appears that marketing expenses were much higher than expectations," Nomura said in the note to clients. SK Telecom Co, the country's biggest wireless carrier, dropped 1.98 percent to 198,500 won with investors worried ahead of its results due out on Tuesday.
Some banking shares were also hit. Third-ranked Woori Financial fell 2.99 percent to 19,500 won despite posting better-than-expected earnings on Friday after saying net interest margins (NIM), a key gauge of profitability for banks, fell from the first quarter.
Trade volume reached 169.5 million shares worth 2.5 trillion won, data at 0635 GMT showed, compared to 194.5 million shares worth 2.3 trillion won on Friday. Gainers edged out decliners by 375 to 352 with 85 titles ending flat. Retail investors sold a net 10 billion won, while institutional investors sold a net 96.8 billion won.
The September KOSPI 200 futures index fell 0.60 point to 168.70, while the underlying KOSPI 200 spot index edged down 0.03 point to 168.51. South Korea's junior and tech heavy Kosdaq market rose 0.17 percent to finish at 557.66.
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