Investors were also encouraged by South Korea posting its first back-to-back growth in exports for the year - there were gains in both October and November - while the country's manufacturing sector shrank at a slower pace last month than in October. Foreign investors were buyers, while institutional selling weighed on the index. "I don't expect the upward trend to be sustainable," said Laurence Kim, an analyst at Woori Investment & Securities.
Recent economic data from the United States and China has been good, but the US economy may have peaked and the rebound in China will be modest, he said. "On top of the euro zone risk and the US fiscal cliff, US economic data could be worse-than-expected and weigh on the stock market," Kim said. With barely a month left before reaching the "fiscal cliff" Republicans and Democrats remained far apart on Friday in talks to avoid the across-the-board tax hikes and spending cuts that threaten to throw the world's biggest economy back into recession.
The KOSPI showed muted response to an announcement by North Korea over the weekend that it would carry out its second rocket launch of 2012. But defence-related stocks rallied, with Victek and Speco jumping by the daily limit of 15 percent. Automakers gained on solid November sales, with Hyundai Motor firming 1.3 percent and Kia Motors rising 1.1 percent. Hyundai said its November sales expanded 12 percent at home and overseas from a year earlier, while Kia's sales went up 6 percent.
Samsung Electronics, South Korea's biggest stock by market value, gained 1.7 percent to 1.43 million won ($1,300), its second-highest closing price to date. Its phone rival LG Electronics rose 1.2 percent. Although most construction shares lost ground, Samsung C&T Corp rose 0.7 percent after it announced it won a $596 million order to build a power plant in Penang, Malaysia. Decliners outnumbered gaining shares 486 to 319. The KOSPI 200 benchmark of core stocks rose 0.5 percent, while the junior KOSDAQ edged 0.1 percent lower.