South Korean shares surged to a three-month closing high on Thursday on heavy foreign buying, with the market underpinned by hopes of decisive action by major central banks to address the fiscal crisis in Europe and bolster global growth. The Korea Composite Stock Price Index (KOSPI) rose 1.96 percent to close at 1,940.59 points, smashing above its closely watched 120-day moving average.
A revised figure of net foreign buying of South Korean shares updated after the closing bell stood at 1.57 trillion won ($1.4 billion), a 13-month daily record. "There was a large overshoot on heavy positional unwinding as investors who had bet against the market closed out their short futures on expiry," said Lim Soo-gyun, an analyst at Samsung Securities.
Thursday was the expiration date for stock options on the KOSPI, and the 1.78 trillion won ($1.6 billion) worth of net shares bought through programmed transactions was the largest single-day sum ever. Sentiment was firmly in "risk-on" mode, as investors relished the prospects of bond-buying by the European Central Bank to ease onerous borrowing costs in Spain and Italy, while Chinese data released on Thursday left the door open for further supportive measures for the world's second largest economy.
The broad market rally saw all 19 industry group sub-indices tracked by bourse operator Korea Exchange ending in positive territory. Winning shares outnumbered losers 5 to 2. China's factory output slumped in July to its weakest in just over three years while its growth in retail sales was slower-than-expected, reinforcing market expectations that Beijing will further loosen monetary policy before the end of September.
Earlier in the session, separate data showed China's annual consumer inflation had fallen to a 30-month low in July, setting it on course to undershoot the government's annual target of 4 percent and providing more leg-room for Chinese policymakers to take supportive action. China-linked shares such as shipyards and steelmakers outperformed peers, with Daewoo Shipbuilding & Marine Engineering soaring 6.1 percent while Dongkuk Steel jumped 6.2 percent.