The prospects are growing that the trade row between the world's top two economies may take a breather through the planned talk between Trump and Xi, and stimulus steps around the globe improving market sentiment.

"The inversion of bond yields in the US has been normalized, leading to gains on Wall Street. This also had a positive impact on the local market," said Yoon Jung-sun, a researcher from KB Securities Co.

Investors are also taking a wait-and-see stance on the so-called Jackson Hole meeting slated for this week, where Fed Chair Jerome Powell is expected to deliver messages on the future of the US rate policy, analysts said.

Retail investors bought a net 189 billion won worth of shares, while foreigners sold a net 141 billion won. Retail investors offloaded more shares than they sold at 57.8 billion won.

It marked the 13th consecutive session for foreigners to become net sellers in the South Korean stock market.

Chemical shares finished higher, with industry leader LG Chem rising 0.31 percent to 321,000 won and top oil refiner SK Innovation advancing 1.27 percent to 160,000 won. S-Oil added 0.68 percent to 88,900 won.

Carmakers were mixed, with No. 1 Hyundai Motor remaining unchanged at 128,000 won, while its auto parts affiliate Hyundai Mobis rose 1.04 percent to 242,000 won. Kia Motors shed 0.23 percent to 43,500 won.

Tech firms closed lower, with top market cap Samsung Electronics falling 0.68 percent to 43,600 won and No. 2 chipmaker SK hynix sliding 1.7 percent to 75,100 won. LG Electronics, on the other hand, gained 0.67 percent to 60,300 won.

The Korean won closed at 1,211.00 won against the US dollar, down 0.20 won from the previous session's close.

Bond prices, which move inversely to yields, closed mixed. The yield on three-year Treasurys fell 0.2 basis point to 1.093 percent while the return on the benchmark five-year government bond climbed 0.4 basis point to 1.131 percent. (Yonhap)