Seoul shares rebounded from two-week lows on Monday, led by defensive dividend-paying stocks such as KEPCO, while technology firms such as Samsung Electronics also gained as recent sharp falls were judged excessive.
But broader gains were capped on caution ahead of interest rate decisions in Japan and South Korea this week, with some analysts warning local markets could remain under pressure this month due to worries about higher oil prices and a strong won.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 1.19 percent to end at 1,344.76, recovering from a session low of 1,324.39, the lowest intraday level since February 17.
"Rising interest rates in Japan and the US remain the biggest risk factor in the near-term, while you also have other uncertainties such as oil prices," said Kim Jun-nyun, a fund manger at Chohung Investment Trust Management.
"Due to these external risks factors, investors are focusing on safer picks such as utilities and telecommunication firms," he added.
Shares on Friday suffered their biggest fall in a month on speculation Japan's central bank could signal an end to its ultra-easy monetary policy at its meeting this week.
Analysts said that could in turn push up the won, which has already gained more than 4 percent so far this year, as well as dent global investments.
The Bank of Korea will decide on its monetary policy on Thursday, although market analysts expect the central bank to leave rates unchanged.
Defensive stocks gained, especially those that also benefit from a recently stronger won.
State-run power provider Korea Electric Power Corp (KEPCO) rose 5.16 percent to 42,800 won.
Steel makers were also in favour, with POSCO Co Ltd ending up 2.59 percent at 238,000 won amid expectations that a recovery in steel prices would help earnings this year.
A stronger won helps cut the costs of imports for firms with a high dependency on raw materials.
Wireless operators were also among the leading gainers, with third-ranked KTF Co Ltd ending up 5.21 percent at 27,250 won.
Samsung Electronics Co Ltd, the world's biggest maker of memory chips, rose 0.92 percent to 658,000 won after falling 5.6 percent over the past four sessions.
Samsung gained even after Intel Corp, the world's biggest maker of memory chips, cut on Friday its revenue forecast citing strong competition and weaker-than-expected demand, with investors seeing the stock as having sufficiently priced in a more uncertain profit outlook.
Meanwhile Hana Financial Group rose 4.91 percent to 44,900 won as investors bet Hana's expected bid for smaller rival Korea Exchange Bank (KEB) may be lower than at first thought after Commerzbank sold an 8.1 percent stake in KEB last week at the bottom of its indicated price range.
Trade volume reached 293 million shares worth 3.4 trillion won as of 0655 GMT, compared to 339.8 million shares worth 4.6 trillion won on Friday. Advancers outnumbered decliners by 483 to 270 with 69 titles ending flat.
Foreign investors sold a net 218.4 billion won in shares on the main bourse.
But institutional investors bought a net 204 billion won, while retail investors purchased a net 976 million won.
The March KOSPI 200 futures index rose 2.50 points to 173.75, while the underlying KOSPI 200 spot index added 2.19 points to 173.86.
South Korea's junior and tech heavy Kosdaq market rose 0.68 percent to finish at 669.56.
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