SEOUL: Seoul shares rose on Wednesday on hopes of a broad policy agreement to address the region's debt issues at an upcoming European summit, but gains were limited as foreign selling continued.
"The market is cautiously optimistic about how things will turn out in Europe," said Kim Seung-han, a market analyst at HI Investment & Securities.
Hot on the footsteps of a Franco-German agreement to enact tighter fiscal measures to control the euro zone's runaway debt, a Financial Times report citing senior European officials hinted at a plan to beef up the region's rescue fund during the upcoming summit later this week.
But following a warning to downgrade the credit rating of 15 euro zone member states, ratings agency Standard & Poor's also placed the region's financial rescue fund on negative credit watch in what could be devastating blow to the euro zone in leveraging a bailout.
Foreign investors were sellers of a net 77.9 billion won ($68.86 million) worth of stocks, while institutions were buyers of a net 165.5 billion won, poised to pick up shares for a 10th consecutive session.
The Korea Composite Stock Price Index (KOSPI) was up 0.92 percent at 1,920.42 points as of 0205 GMT.
Shares in LG Chem, South Korea's top chemicals firm, fell 4 percent after local media reported that it planned to spin off its battery division in the first half of next year.
LG Chem denied the report.
A spinoff "would have a negative impact as LG Chem has been nurturing its battery business as its new growth engine," said Anthony Kim, an analyst at Woori Investment & Securities.
Shinhan Financial Group advanced 2.4 percent and Hana Financial Group climbed 1 percent after Standard & Poor's said it had upgraded the credit rating of both banks by one notch.
Shares in dairy firms spiked after local media reports harmful chemicals were found in baby formula from Japan, pointing to stronger demand for local alternatives.
Namyang Dairy jumped 4.4 percent and Maeil Dairy spiked 9 percent.
Sam Yang Food rallied nearly 11 percent on the back of robust sales of a new line of instant noodle products.
"Sam Yang's sales next year are expected to rise around 38 percent from this year," said Kim Yoon-oh, an analyst at Shinyoung Securities.
Key large-cap technology companies traded firm, with Samsung Electronics, the world's No.1 memory chip maker, gaining 1.2 percent and LG Electronics, the world's No.3 handset maker, climbing 2 percent.
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