Seoul shares set a record high on Monday, led by exporters such as Samsung Electronics on hopes for a possible suspension of interest rate increases in the key US market, while banks were bolstered by their earnings outlook.
But gains were pared in the day's light trading as the won surged to its highest in more than eight and a half years, making some analysts cautious about whether the market would sustain the recent gains.
Foreign investors, whose heavy purchases of stocks had been a major factor behind the KOSPI's gains this year, ended as net sellers for an eighth consecutive session after a late session sell-off. They unloaded a net 11.2 billion won on the main bourse, according to data at 0700 GMT, pushing up their net sales total over the period to 2 trillion won.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.78 percent to post a record close of 1,452.23. The index had earlier hit an all-time high of 1,461.05, beating the prior high of 1,458.67 set on April 27.
South Korean financial markets were closed on Friday for a public holiday.
US stocks rallied on Friday, with the Dow Jones industrial average approaching record closing levels, after data showed US employers added fewer jobs than expected in April. That set off expectations the US Federal Reserve will soon end its cycle of rate rises after almost two years, providing some relief to firms that had been facing higher borrowing costs.
"The markets are increasingly confident that the US monetary policy makers are becoming less concerned about inflationary pressures and will stop interest rate hikes," said Lim Chang-gue, a fund manager at Samsung Investment Trust Management.
Exporters rose on the news from the United States, South Korea's largest export market after China. Samsung Electronics Co Ltd, the world's biggest maker of memory chips, gained 1.55 percent to 655,000 won.
Hyundai Motor Co jumped 3.79 percent to 85,000 won after its first quarter operating profit beat estimates on Thursday, which helped offset prior concerns about the recent arrest of the auto maker's chairman on charges of misusing company funds.
Banks also gained amid optimism about their earnings outlook following a string of positive first-quarter results.
Kookmin Bank, the country's biggest lender, rose 2.74 percent to 89,900 won, after earlier setting an all-time high of 90,400 won.
Brokerages advanced on optimism that trading volumes would increase. Samsung Securities Co, the country's most valuable brokerage, rose 2.22 percent to 59,800 won.
Hyundai Heavy Industries Co, the world's biggest shipbuilder, rose 5.61 percent to a record 103,500 won, as investors bet on solid first-quarter results in the sector amid booming orders.
Trading was light, with 254 million shares, worth 4.1 trillion won, changing hands as of 0700 GMT, the smallest number of shares traded since 253 million shares on May 31, 2005.
However, some analysts noted a surging won could limit gains after the domestic currency on Monday ended trade at 927.9 against the dollar, the strongest since 924.0 on October 24, 1997. Higher oil prices are also seen as persistent near-term risks.
"Export-oriented manufacturing companies are suffering a lot. One company I visited a couple of weeks ago had drafted a business plan for the year expecting a won-to-dollar ratio of 1,050 won," said Samsung's Lim.
Gainers edged out decliners by 393 to 364 with 63 titles ending flat. Retail investors sold a net 23.4 billion won, but institutional investors bought a net 32.8 billion won. The June KOSPI 200 futures index rose 1.80 points to 189.10, while the underlying KOSPI 200 spot index a0dvanced 1.81 points to 188.79.
South Korea's junior and tech heavy Kosdaq market gained 0.29 percent to finish at 691.89.
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