(Updates to close)
By Rafael Nam
SEOUL, July 31 (Reuters) - Seoul shares rose 1.4 percent on Tuesday for a second winning session as improved business sentiment data lifted manufacturers such as LG.Philips LCD, helping the main index to its best month since November 2005.
Despite last week's volatile ride, the KOSPI surged 10.9 percent in July, marking its sixth consecutive monthly gain in a record-setting rally driven by optimism about the economy and corporate profits, and supported by an influx of money into mutual funds.
But uncertainties remain in the short term, including problems in the U.S. subprime mortgage sector, which had dented global markets last week and led the KOSPI to plunge 6 percent over two sessions after it had surpassed 2,000 points for the first time.
Trading volumes have dropped noticeably this week, while foreign investors were on Tuesday net sellers for a 12th consecutive session, bringing their total during that period to a net 4.9 trillion won ($5.33 billion).
"The economy is looking good, quite good, and the recent economic indicators have not shown any troubling signs. Cash inflows into funds remain good, so that many Korean asset managers have to continue buying shares," said Kim Hyun-tae, a fund manager at Landmark Investment Management.
"Going forward, the key thing is whether the U.S. markets stabilise," he added.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 1.39 percent to end at 1,933.27 points.
The main index is still up 34.8 percent for the year, although it's well below an intraday record of 2,015.48 hit just last week.
Confidence about the economy was further underpinned after a survey on Tuesday showed business sentiment at manufacturers rebounded in August, which came a day after data showed industrial production output in June rose faster than expected. [ID:nSEO301806]
Also anchoring gains on Tuesday was a rebound on Wall Street overnight as optimism about earnings resurfaced and concern about credit conditions eased.
Flat-panel maker LG.Philips LCD Co. Ltd. gained 2.73 percent to 43,300 won, while chip maker Samsung Electronics Co. Ltd. gained 0.66 percent to 614,000 won.
LG Telecom rose 1.31 percent to 10,050 won, despite second-quarter net profit that fell short of market consensus, as revenues and operating profit appeared healthy. [ID:nSEF000018]
CJ Internet surged 5.88 percent to 25,200 won after the Internet firm said quarterly net profit more than doubled from a year earlier to well above analyst estimates. [ID:nSEO209459]
But Kookmin Bank dropped 3.26 percent to 80,200 won a day after the country's biggest lender posted a 70 percent fall in quarterly net profit, with net interest margins (NIM) -- a key profitability gauge -- sliding more than expected. [ID:nSEO269543] "Since further NIM deterioration is expected in coming quarters, core earnings growth momentum should remain weak for a while," said Merrill Lynch in a note to clients.
Auto parts makerMobis fell 1.48 percent to 100,000 won after saying operating profit fell 6.5 percent from a year earlier.