The Korea Composite Stock Price Index (KOSPI) fell 0.3 percent to close at 1,945.79 points, losing ground on a four-day high in the previous session.

"North Korean issues tended to increase volatility in the past, but volatility was limited today as foreigners' net buying supported investor sentiment," said Kim Seong-no, strategist at KB Investment & Securities.

North Korea set off a small nuclear bomb near mid-session on Tuesday after threatening a third nuclear test since last month.

KOSPI declines following North Korea's nuclear tests in 2006 and 2009 were short-lived, with the main board regaining lost ground and rising further within seven days of both tests.

Market participants were more concerned with currency moves and upcoming events such as the Group of 20 finance ministers' meeting, said HI Investment & Securities analyst Kim Seung-han.

Index heavyweight Samsung Electronics closed up 0.4 percent, extending a 3 percent gain on Friday.

Samsung Electronics shed 4.9 percent of its value in January as a weak yen and a strong won fuelled worries that blue-chip exporters would be hobbled versus Japanese competitors in overseas markets.

Small-cap defence stocks were bullish on strong retail buying in the aftermath of the North Korean nuclear test.

Tactical communications solutions provider Huneed Technologies was up 7.8 percent while weapons guidance systems maker Firstec Co Ltd rose 13.4 percent.

Tongyang Networks plunged 8.3 percent after it said preferential talks with IBM's South Korean unit to buy its IT services business had been tentatively postponed.

Local institutional investors sold a net 160 billion Korean won ($146.02 million) worth of KOSPI shares, weighing on the main board. Decliners outnumbered gainers 465 to 313.

The KOSPI 200 benchmark of core stocks and the junior KOSDAQ both closed down 0.2 percent, respectively.