Following his turbulent return from exile last week, South Korean dissident leader Kim Dae Jung is settling into a life of watching and waiting in his modest brick home in western Seoul.

Police in khaki jackets stand guard outside its gate and along adjacent streets. They are there to make sure that Kim does not come out and only foreign reporters and members of his immediate family go in.

Visitors walk past a sign declaring the area off limits because of "national security" and sign in at a police box set up for Kim.

Inside, Kim is trying to keep abreast of politics through newspapers, television and telephones on which the police are presumed to be listening.

Wearing traditional Korean dress, he receives visitors in his living room. In an interview today, Kim said he had not decided on his next move. "I am watching the government's attitude," he said.

He said there was still hope for a dialogue he has requested with President Chun Doo Hwan. For the time being, he said, he hopes the opposition will follow a moderate course to facilitate such a meeting.

He has asked the government to end his confinement, which keeps him from meeting with his old political allies, he said.

"If house arrest is not lifted, I must take other measures to communicate with them," he said. He did not elaborate.

Chun was reported to be considering lifting the ban on Kim and 14 other dissidents, Reuter reported Friday, quoting the usually well-informed daily South Korean newspaper Chosun Ilbo. The paper, citing government sources, said the government felt that such a step was necessary to defuse political tension.

Kim's hand has been strengthened by the performance of the New Korea Democratic Party in National Assembly elections this week. Dominated by Kim's followers, the party took 50 elective seats to became the largest opposition force in the 276-seat assembly.

Its showing caught both its own members and the ruling Democratic Justice Party by surprise. In party offices around Seoul, leaders are still trying to map out a response.

Some western diplomats in Seoul have expressed concern that the Chun government will feel threatened by the new party, organized only one month before the election, and crack down rather than accommodate.

But a government party official today gave a different view. The vote showed that "people want stability, but they also want liberalization," he said. "We will have to accommodate those two desires."

Another ruling party member, assemblyman Choi Young Choul, said the results could aid stability. "People who have been noisy outside the National Assembly have now been taken into the official framework of the legislature," he said in an interview at party headquarters today.

There have been some tentative signs of conciliation from the government, which will continue to control the assembly. Prosecutors have told the press that they will use "restraint" in pursuing claims of election law violations. Most of these violations were allegedly committed by opposition candidates. The government party also has agreed to meet with opposition leaders before the assembly convenes in late March or early April.

But there are also signs that the government is worried. Yesterday, authorities were reported to have sealed off the campuses of two Seoul universities, already largely vacant because of winter vacation, out of concern that demonstrators would gather there.

At the new opposition party's 10th-floor headquarters on Seoul's Yoido Island, a festive air still prevailed yesterday, two days after the voting. With reporters and television crews crowding around him, party president Lee Min Woo spoke about "the will of the people" and the party's plans to act forcefully on it.