"There was a lot of negative news domestically, but fortunately foreign investors actively bought, particularly in sectors with a healthy 2004 outlook, such as semiconductors, automobiles, and shipping firms," said Jo Jae-hoon, an analyst at Daewoo Securities.
The benchmark Korea Composite Stock Price Index (KOSPI) closed up 0.35 percent at 824.10 points, the highest since May 29, 2002 when it ended at 835.19 points.
Samsung Electronics Co Ltd, the world's largest memory chip maker, climbed 1.89 percent to 457,500 won on expectations of steady earnings growth and a rosy outlook for 2004.
Other local semiconductor shares followed suit, with Hynix Semiconductor Inc surging 11.61 percent to 6,250 won and Anam Semiconductor Co jumping 5.88 percent to 4,320 won.
"While credit card and many financial shares were embroiled in the card woes, investors flocked to chip shares on a bright industry outlook for this year," said Choi Si-won, a semiconductor analyst at Sejong Securities.
Investors again dumped shares of LG Card, sending them down by their 15 percent daily limit at 2,975 won, well below their face value of 5,000 won.
Many of the card firm's 16 creditors remain undecided on whether to back a $4.2 billion rescue package for the ailing company.
State-run Korea Development Bank offered on Friday to bear a greater part of the cost of saving LG Card in a bail out.
LG Card said at the weekend it could run out of money again if lenders failed to agree by Monday on the immediate aid plan, with about 500 billion won ($418.4 million) of its total 20 trillion won debt coming due on Monday.
The other listed credit card firm, KEB Credit Service Co, also slipped 7.77 percent to 3,385 won.
Banking shares recovered from early losses to end the session in positive territory, aided by active foreign buying. Shares in several LG Card creditor banks fell in morning trade due to concerns over the financial burden stemming from their exposure to the troubled card issuer.
"Foreign investors appeared to buy the banking shares believing they were undervalued despite short-term risks in the sector," said Jo at Daewoo Securities.
Shares in Woori Financial Group, whose banking unit is the main creditor of LG Card, finished up 0.15 percent at 6,860 won, off a session low of 6,680 won.
Kookmin Bank shares also climbed 1.76 percent to 46,200 won as the bank said it had not approved a joint bail-out for LG Card. However, some analysts doubted whether banking shares would remain in favour.
"Uncertainties about the rescue measures for LG Card will remain as a major burden to banking shares," said Kim Hak-kyun, an analyst at Good-morning Shinhan Securities.
Trade volume totalled 402.7 million shares, up from 300.6 million shares on Friday. Turnover stood at 2.22 trillion won, up from 1.93 trillion won. Losers edged out gainers by 387 to 340 with 80 stocks ending unchanged.
Foreign investors bought a net 169.8 billion won in shares, while institutional investors sold a net 132.0 billion won. Retail investors sold a net 32.8 billion won worth of shares.
The March KOSPI 200 futures index ended up 0.30 points at 107.65 and the underlying KOSPI 200 spot index rose 0.39 percent to 107.07. The junior Kosdaq ended up 0.29 percent at 45.27.