The Korea Composite Stock Price Index (KOSPI) closed up 1.7 percent, the biggest daily percentage gain since mid-September, at 2,031.10 points.
"The index is riding high on the US fiscal deal. This upward momentum will last a couple of weeks, after which there will be a reality check due to the unresolved issue of the spending cuts and debt ceiling," said Cho Tae-hoon, an analyst at Samsung Securities.
After avoiding the 'cliff', the US faces other bruising budget battles, such as cutting the deficit and raising the debt ceiling, in the next two months.
The day's gains were broad based, with 545 shares gaining while 277 declined.
Samsung Electronics, the world's biggest smartphone maker by sales, rose 3.6 percent to a lifetime high of 1.576 million won ($1,500).
Its smartphone and TV rival LG Electronics jumped 5.3 percent.
"Investors are pinning hopes that smartphone sales will drive earnings growth of big technology firms this year," said John Park, an analyst at Daishin Securities.
"For LG Electronics, it will continue to raise brand recognition and become a leader among second-tier smartphone makers after Samsung and Apple," he said.
News that LG Electronics started taking orders for televisions using next-generation displays also helped lift shares, he said.
Steelmaker POSCO, power utility KEPCO and Daewoo Shipbuilding & Marine Engineering all gained more than 3 percent.
However, automakers bucked the trend, hurt by concerns that the strengthening Korean won would reduce price competitiveness and earnings.
The won jumped to a 16-month high against the dollar on Wednesday and prompted the finance minister to warn that the government may intervene to "curb one-way bets" against it.
Shares of Hyundai Motor were down 1.1 percent, while sibling Kia Motors fell 0.3 percent.
The two automakers said on Wednesday they aimed to increase global sales by 4 percent this year, which would be their slowest growth since 2003.
Foreign investors bought a net 172 billion won worth of KOSPI shares, boosting the main board along with local institutions.
The KOSPI 200 benchmark of core stocks closed up 2 percent, while the junior KOSDAQ edged 1 percent higher.
Center>Copyright Reuters, 2013
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