South Korean shares ended bullish for two straight days on Friday as foreign investors bought more shares than they sold amid Europe optimism formed after positive results of bond auctions in Italy and Spain, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 11.11 points, or 0.6 percent, to close at 1,875.68. Trading volume stood at 465.98 million shares worth 5.17 trillion won (4.5 billion U.S. dollars).

The KOSPI started higher and stayed in positive territory during the trading as news from Europe helped lift the market sentiment. Italy successfully sold 12-month government bonds, with the lowest yield since June 2011, while Spain issued 4.2 billion euros worth of bonds, sawing the yields falling.

"The KOSPI gained today on the successful bond auctions in Europe, but the rise was limited as investors are still wary about whether the successful auction would continue," Lee Jae-man, an analyst at Dongyang Securities in Seoul, told Xinhua.

The Bank of Korea (BOK)'s monetary policy decision had little impact on the market as the decision was in line with market expectations. The BOK left the benchmark 7-day repo rate unchanged at 3.25 percent for the seventh consecutive month, citing lingering external uncertainties such as Europe's debt crisis and economic slowdown in advanced nations.

The European Central Bank (ECB) froze its key rate at 1.0 percent overnight in the first policy meeting of this year, eliminating concerns over any possible changes in monetary policies. ECB President Mario Draghi said that ongoing financial market tensions continued to dampen economic activity in the euro area.

The U.S. economic indicators showed signs of slower recovery. Initial jobless claims jumped to 399,000 last week, the highest level in six weeks. Retail sales in the world's No. 1 economy grew 0.1 percent last month after rising by an upwardly revised 0.4 percent in November.

Meanwhile, foreign investors led the market gain. Foreigners bought a net 164.4 billion won worth of shares, keeping their buying streak for the fourth consecutive session. Institutional investors continued to buy stocks for five trading days in a row, with their net purchase reaching 135.2 billion won.

Program-linked transaction posted net buying worth 280.9 billion won, but retail investors offloaded a net 338.3 billion won worth of shares in a bid to take recent profits.

Tech shares ended bullish. Market bellwether Samsung Electronics rose 1.75 percent to 1,046,000 won, and memory chip giant Hynix Semiconductor jumped 4.14 percent to 25,150 won on hopes for better-than-expected earnings results in the fourth quarter.

However, some large-cap shares lost ground, limiting the KOSPI' s further gain. The world's largest shipyard Hyundai Heavy Industries fell 0.86 percent to 289,000 won, and top automaker Hyundai Motor dipped 0.87 percent to 227,500 won.

The local currency closed at 1,148.3 won against the greenback, up 9.9 won from Thursday's close.

Bond prices ended higher. The yield on the liquid three-year treasury notes fell 0.01 percentage point to 3.37 percent, and the return on the benchmark five-year government bonds lost 0.01 percentage point to 3.50 percent.