South Korean shares kept technical rebound for the second straight day on Tuesday as retail investors snapped up stocks which they thought were undervalued.

The benchmark Korea Composite Stock Price Index (KOSPI) gained 29.56 points, or 1.64 percent, to close at 1,828.69. Trading volume stood at 418.66 million shares worth 4.8 trillion won (4.13 billion U.S. dollars).

The KOSPI started higher and extended its earlier gains throughout the session due to the second consecutive session of technical rebound from the index's recent sharp fall.

Foreign investors bought local stocks in the morning session, but they turned to net sellers later. Foreigners maintained their selling spree for 15 days in a row, but their selling volume reduced after peaking at 428.6 billion won last Friday. They sold a net 28.4 billion won worth of local stocks.

Local institutions were also net sellers worth a net 26.8 billion won worth of stocks, but retail investors drove up the KOSPI to end higher by purchasing a net 107.6 billion won worth of stocks.

Market watchers said that the KOSPI's gain was extended later in the trading as views spread that the index was undervalued due to the recent sharp drop, saying that the KOSPI suffered excessively from concerns over Europe's debt crisis.

Adding to the gains, China's Premier Wen Jiabao promised to boost the country's consumption rather than focusing primarily on curbing inflation during the weekend, which gave a boost to companies that rely heavily on China demand.

Meanwhile, concerns remained that the KOPSI will show a volatile trading until mid-June when the second round of general election in Greece is scheduled to end.

Tech shares led the market rebound as foreigners bet on the domestic tech firms. Market bellwether Samsung Electronics advanced 2.6 percent to 1,240,000 won, and consumer electronics giant LG Electronics surged 7.6 percent to 67,700 won. Flat screen maker LG Display gained 1.7 percent to 21,250 won, and memory chip giant SK Hynix rose 0.6 percent to 23,550 won.

Other large-cap shares gained ground. The world's largest shipbuilder Hyundai Heavy Industries advanced 2.9 percent to 262, 500 won, and top crude oil refiner SK Innovation added 1.4 percent to 142,500 won. The country's biggest life insurer Samsung Life Insurance rose 0.8 percent to 96,100 won, and leading chemical firm LG Chem was up 0.9 percent to end at 283,000 won.

Auto shares ended bearish. Top automaker Hyundai Motor and its affiliate Kia Motors closed at 237,000 won and 76,100 won respectively, unchanged from Monday's close, while top auto parts maker Hyundai Mobis fell 1.1 percent to 271,500 won.

The local currency finished at 1,163.2 won against the greenback, up 5.7 won from Monday's close.

Bond prices ended mixed. The yield on the liquid three-year treasury notes fell 0.01 percentage point to 3.36 percent, but the return on the benchmark five-year government bonds closed steady at 3.49 percent.