Seoul shares rose 0.7 percent on Monday, pushing on after their best week in nearly five years, as vessel makers such as Daewoo Shipbuilding rallied following good July results and additional orders.
POSCO Co Ltd surged after a brokerage forecast higher steel prices in the autumn, while SK Energy Co gained on a newspaper report the oil refiner was considering a stake swap with an affiliate.
But the main index pared earlier gains of as much as 2.4 percent as exporters ended in the red after initially advancing following Friday's stronger-than-expected US home sales and durable goods orders data.
The culprit behind the reversal was continued caution about further fallout from the US subprime mortgage sector, including tighter credit conditions, analysts said.
"There's still considerable debate about how big the impact from the US subprime problems will be on the global economy," said Kim Hyun-tae, a fund manager at Landmark Investment Management.
"The gains we have seen recently are more of a rebound from this month's sharp falls than genuine positive momentum," he added. The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.65 percent to end at 1,803.03 points.
The main index had risen 9.4 percent last week, nearly recovering all of a 10.4 percent slump in the previous week, but the KOSPI is still well short of a record 2,015.48 points hit on July 26.
Foreign investors ended the session buying a net 67.3 billion won ($71.49 million), only their second day of net purchases in the past 30 trading sessions.
Vessel makers were among the session's best performers, with Daewoo Shipbuilding and Marine Engineering Co Ltd, the world's second-biggest shipbuilder, ending up 3.44 percent at 51,100 won after saying it swung to a profit in July.
The shares were also lifted by market talk it was planning to build a new floating dock in a South Korean port to help it increase production. Daewoo Shipbuilding later confirmed the speculation, saying it would spend up to 150 billion won ($159.3 million) in the construction.
Third-ranked Samsung Heavy Industries Co rose 2.75 percent to 44,800 won after saying on Monday it had won a 1.27 trillion won order to build eight container ships from an unidentified company in Europe.
Top-ranked Hyundai Heavy Industries Co , which on Thursday had reported a surge in the value of July orders, rose 5.79 percent to 347,000 won.
POSCO rose 4.47 percent to 538,000 won. Samsung Securities said global steel prices would rebound in the autumn, following a slack season in the summer, helped by better inventory controls in the US and Chinese markets and strong prices of raw materials.
SK Energy rose 1.49 percent to 136,000 won after the Korea Economic Daily reported affiliate SK Holdings Co would buy some 13.7 million shares in the oil refiner, or a 15 percent stake.
SK Holdings would have to issue new shares to finance the purchase, the newspaper said, sending the holding firm down 3.79 percent to 152,500 won.
LIG Insurance surged 5.02 percent to 24,050 won on market talk that Woori Financial Group was seeking to buy LIG's life insurance unit. Woori declined to confirm whether it was interested.
Logistics firm Korea Express, which is under court receivership, soared by its daily limit of 15 percent to 111,500 won after the company said in a Korea Exchange filing it was in negotiations with a local court to put itself up for sale.
But Kia Motors Corp dropped 4.03 percent to 11,900 won as contract workers remained on strike for a third working day on Monday, having cost the auto maker at least 43 billion won in lost output, according to a company spokesman. Institutional investors bought a net 1 billion won, but retail investors sold a net 10.6 billion won.
Trade volume reached 357.7 million shares worth 4.9 trillion won compared to 376 million shares worth 4.9 trillion won on Friday. Gainers outnumbered decliners by 443 to 337 with 70 titles ending flat.
The September KOSPI 200 futures index rose 1.95 points to 229.30, while the underlying KOSPI 200 spot index added 1.47 points to 228.65. The junior and tech-heavy Kosdaq market rose 0.86 percent to finish at 760.63.