South Korean shares rose on Monday, extending gains after Moody's upgraded South Korea's credit rating outlook and sparked a late rally in financials. Rating agency Moody's raised the outlook on South Korea's sovereign credit rating to positive from stable, citing strong and improving fiscal positions and easing external vulnerability of the banking sector.
Banks rallied on the news following a slow start in the morning to close out the session as lead performers. Hana Financial Group soared 5.2 percent while Woori Finance Holdings rose 3.9 percent. The Korea Composite Stock Price Index (KOSPI) gained 0.76 percent to close at 2,029.29 points.
"Investors saw the KOSPI market as undervalued after it failed to track a broad rally in other global peers last week and overall gains were further amplified by bank shares which were lifted by the announcement of Moody's outlook upgrade," said Han Bum-ho, an analyst at Shinhan Investment & Securities.
China-related stocks such as shipbuilders and steelmakers rebounded on bargain-hunting after dragging on the index all throughout March over growth worries in the world's second-largest economy. China's big factories were surprisingly busy in March as a stream of new orders lifted activity to an 11-month high, but credit-constrained smaller manufacturers struggled, suggesting that the economy is still losing steam.
"Investors are buying low on sectors that were subject to exaggerated falls as a result of prior output data from HSBC rather than moving on the latest news from China itself," said Kim Soo-young, an analyst at KB Securities. Hyundai Steel led gains among steel producers, advancing 2.5 percent while Samsung Heavy Industries, the world's second-largest shipbuilder, rose 1.3 percent.
Despite Monday's advances, analysts said risk appetites have yet to turn a corner, with foreign investors reverting to net sellers during Monday's session as they continued holding out on riskier bets pending further market cues. "Investors don't appear confident enough to make aggressive bids without the release of solid March economic data and first-quarter corporate earnings to confirm their cautious optimism," said Han.
Offshore investors snapped a two-day buying streak to turn into net sellers, disposing a net 15.1 billion won ($13.3 million) worth of shares. The KOSPI 200 index closed up 0.9 percent while the junior KOSDAQ edged 0.4 percent higher. The main bourse saw 405.8 million shares change hands while winning shares outnumbered decliners 472 to 330.