The benchmark Korea Composite Stock Price Index (KOSPI) surged 94.79 points, or 5.89 percent, to settle at 1,704.76. Trading volume stood at 852 million shares worth 12.4 trillion won (10 billion U.S. dollars).
The KOSPI started 3.6 percent higher, and extended earlier gains throughout the session on expectation for the U.S. fiscal stimulus package.
The South Korean government announced measures Tuesday to reduce volatility in the financial market.
Market sentiment was also improved by earlier monetary and fiscal stimulus steps from major economies and South Korea, unveiled to mitigate the economic fallout from the COVID-19 outbreak across the world.
Foreign investors kept selling local stocks for the 15th consecutive session, but retail investors snapped up shares on views that domestic stocks were underperformed.
Most of blue-chip shares gained ground. The biggest automaker Hyundai Motor jumped 13 percent, and leading chemical firm LG Chem advanced 6.8 percent. Market bellwether Samsung Electronics rose 3.6 percent, and memory chip giant SK Hynix soared 7.4 percent.
Biopharmaceutical behemoth Celltrion slipped 0.5 percent, and Samsung BioLogics, the biopharmaceutical unit of Samsung Group, lost 0.2 percent.
The small-cap KOSDAQ picked up 25.28 points, or 5.26 percent, to close at 505.68.
Helped by the stock market rebound, the local currency soared to the dollar. The won/dollar exchange rate tumbled 19.7 won to finish at 1,229.9 won per dollar, falling below the 1,230 won in nine trading days.
Bond prices ended mixed. Yields on the liquid three-year treasury notes added 0.4 basis points to 1.131 percent, but the return on the 10-year government bonds fell 6.1 basis points to 1.647 percent.
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