SEOUL: South Korea's KOSPI index posted a moderate rally on Tuesday following Monday's heavy adjustment as investors received a morale boost from signs of resilience in the US economy and a successful Italian bond auction.
Further lifting sentiment was a German-led fiscal pact among euro zone members for tighter budget discipline and the long-expected fast tracking of a permanent EU bailout fund.
"There have long been concerns whether euro zone countries would be able to refinance themselves in the upcoming string of debt rollovers, but lower yields in Italy eased some of those worries," said Hong Soon-pyo, an analyst at Daishin Securities.
"A weaker won has also brought relief to exporters and helped ease foreign selling, but longer-term signs of improving fundamentals will be needed to create the momentum for shares to break out of the current range," he added.
Italy passed a key confidence test on Monday after its 10-year borrowing costs fell to 6.08 percent, shrugging off a two-notch bumpdown of its credit rating by Standard & Poor's and Fitch Ratings this month.
South Korea's industrial output fell far short of street forecasts to post a surprise fall in December, data showed before the market open, but investors' response was muted.
The Korea Composite Stock Price Index (KOSPI) was up 0.81 percent at 1,956.39 as of 0235 GMT.
Gains were led by shipbuilders. Daewoo Shipbuilding saw its shares jump 6.12 percent after announcing it won a $560 million order.
Hyundai Heavy Industries, the world's largest shipmaker, rose 3.17 percent while Samsung Heavy Industries gained 3.68 percent.
Refiners and petrochemical issues lent support. LG Chem soared 3.97 percent, while SK Innovation the holding firm of South Korea's largest crude oil refiner, climbed 2.4 percent.
Korea Electric Power Corp (KEPCO) rose 2.02 percent after it said in a filing its consortium with Mitsubishi Corp had won a $800 million power plant order in Jordan.
Nongshim rallied 5.18 percent after local media said the company had set a target of 500 billion won ($443.56 million) in overseas sales this year.
Offshore investors sold a net 24.8 billion won ($22 million) worth of shares while institutions bought a net 40.6 billion won worth.
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