The benchmark Korea Composite Stock Price Index (KOSPI) soared 127.51 points, or 8.60 percent, to settle at 1,609.97. Trading volume stood at 670.9 million shares worth 10.3 trillion won (8.2 billion U.S. dollars).
The KOSPI gained 2.8 percent higher and extended initial gains throughout the session.
Local financial institutions snapped up stocks as the U.S. Federal Reserve announced a plan overnight to purchase U.S. treasuries and agency mortgage-backed securities without any limit to support financial markets.
Adding to the positive news, the South Korean government unveiled a plan to launch 20 trillion won (15.9 billion U.S. dollars) of the bond market stabilization fund to stabilize the corporate debt market. It was double the amount of the fund formed during the 2008 global financial crisis.
As a buffer against the stock market crash, 10.7 trillion won (8.5 billion U.S. dollars) worth of the securities market stabilization fund will be created, about 20 times larger than the stock market stabilization fund of the 2008 crisis.
The small-cap KOSDAQ advanced 36.64 points, or 8.26 percent, to close at 480.40.
A sidecar was activated both in the KOSPI and the KOSDAQ to halt computer-programmed trading for five minutes. It is imposed when stock futures fluctuate more than 5 percent for at least one minute.
Helped by the stock market surge, the South Korean currency surged versus the dollar. The won/dollar exchange rate dived 16.9 won to finish at 1,249.6 won per dollar.
Bond prices ended higher on demand for emerging market assets. Yields on the liquid three-year treasury notes lost 2.6 basis points to 1.127 percent, and the return on the 10-year government bonds fell 1.0 basis point to 1.708 percent.
Large-cap shares gained ground. Market bellwether Samsung Electronics picked up 10.5 percent, and memory chip giant SK Hynix soared 13.4 percent. Samsung BioLogics, the biopharmaceutical unit of Samsung Group, advanced 9.2 percent, and the most-used search engine Naver jumped 9.1 percent.
The biggest automaker Hyundai Motor increased 8.6 percent, and leading chemical firm LG Chem went up 7.5 percent.
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