Seoul shares climbed above 2,000 points on Tuesday for the first time as banks gained, but then reversed themselves to end flat, as technology stocks fell following weak revenue guidance from Texas Instruments.
Analysts appeared largely confident this year's bull market will keep roaring on expectations the economy and corporate earnings are heading for better days, with the rally underpinned by a surge in money flowing into mutual funds.
But some also urged investors to remain cautious in the short term in a market that has now gained 39 percent for the year - second only to Shanghai among major regional markets.
"The KOSPI at 2,000 points is a monumental moment in the history of the Korean stock market. It's a symbolic moment that is representative of the market today," said Lim Chang-gue, a fund manager at Samsung Investment Trust Management.
"This is the time to be cautious. The speed of the rally has been too fast and needs some correcting. But if you have more than a short-term horizon, the outlook for the next two or three years is very positive."
The benchmark Korea Composite Stock Price Index (KOSPI) ended down 0.04 percent at 1,992.26 points after earlier hitting a record 2,005.02 points. The KOSPI has broken several benchmarks on its way to 2,000 points, forcing analysts to play catch up in a market that has climbed faster than many had anticipated at the start of 2007.
A surge in money from retail investors into mutual funds has been key, with a record 3.5 trillion won ($3.83 billion) coming into domestic-oriented equity funds in June alone.
That has made the market unpredictable to many, as fund managers struggle to stay ahead of a market that keeps gaining. "We've reached the 2,000-point level much sooner and much faster than people had anticipated, but I don't see a peak in sentiment yet," said Kim Yung-min, a fund manager at Jeil Mutual Savings Bank.