Seoul shares gain 0.3% on Chinese stock gains

South Korean stocks finished 0.3 percent higher Monday, as investor sentiment was partly boosted by advances in equities markets overseas, including China, analysts said, but gains were capped as foreign investors cut holdings of local equities on lingering inter-Korean tension.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 4.75 points to 1,604.93. Trading volume was light at 266.24 million shares worth 4.71 trillion won (US$ 3.87 billion) with losers leading gainers 538 to 282. The local currency fell sharply against the U.S. greenback.

"Geopolitical risks continue to hover in the local market as can be seen in the fall of the local currency," said Kim Hyoung-ryoul, an analyst at NH Investment & Securities. "But Chinese markets rose as much as 5 percent during the trading session, which calmed investors and limited panic sell-offs that characterized the market last week."

While the local currency dropped sharply against the U.S. dollar, stock markets showed a muted reaction to the nationally aired speech by President Lee Myung-bak who urged North Korea to apologize for the warship that sank near near the maritime border with North Korea on March 26.

Lee's remarks, including a vow to punish the communist state through the U.N. Security Council, was largely in line with market expectation.

Commodity producers were among the biggest gainers as investors expected the rise of the U.S. dollar would help trim commodity prices and stoke demand.

POSCO, the world's fourth-largest steelmaker, rose 4.83 percent to 455,500 won while Hyundai Steel shot up 5.77 percent to 84,300 won. Korea Zinc, the world's second-biggest zinc smelter, added 2.99 percent to 189,500 won.

Bank issues mirrored gains among their U.S. peers, rebounding on Friday as the U.S. Senate's passage of a financial reform bill eased uncertainty. KB Financial Group, which controls No. 1 lender Kookmin Bank, advanced 2.93 percent to 50,900 won and Woori Financial Holdings rose 4.32 percent to 15,700 won.

Samsung Life Insurance, the biggest life insurance company, however, sank 4.65 percent to 102,500 won, pressured by foreign selling.

The local currency closed at an eight-month low of 1,214.5 won to the greenback, down 20.4 won from the previous session, as investors fled risky assets on concerns about geopolitical risks in the Korean peninsula, dealers said.