South Korean stocks closed nearly 1 percent higher Thursday as eased worries about a slowdown in China and a U.S. interest rate hike whetted investor appetite for risky assets, analysts said. The local currency rose sharply against the U.S. dollar.

The benchmark Korea Composite Stock Price Index finished up 16.51 points, or 0.84 percent to 1,979.32. Trading volume was heavy at 667.4 million shares worth 5.09 trillion won ($4.3 billion) with gainers far outstripping decliners 565 to 235.

Analysts said investors shook off the prolonged fear of slowing growth and uncertainties in the world's two economic superpowers, hunting for bargains.

"Following the rebound of U.S. stocks overnight, Asian stocks rallied. We're also seeing a firm foreign inflow again, which alleviated concerns over the G2 risk," said Bae Sung-jin, an analyst at Hyundai Securities Co. 

The KOSPI started off nearly flat in a tepid session, but extended gains in late trading as foreigners and institutions went bargain hunting.

Offshore investors bought a net 104.7 billion won, with institutions scooping up a net 170.1 billion won. Individuals, in contrast, sold off a net 308.5 billion won. 

China's manufacturing index, or PMI, which was released later in the day, indicated a sign of stabilization with a slight gain from the previous month, giving a boost to Seoul shares.

Clothing companies drove up the main index, buoyed by hopes that the long public holiday in China, starting from Thursday, will bring more tourists with deep pockets to Seoul. Handsome Corp. a leading women's apparel maker soared 5.24 percent to 41,200 won, with Samsung C&T, the clothing arm of Samsung Group, jumping 4.78 percent to 153,500 won.

Automakers also closed bullish on market expectation that they will benefit from Volkswagen's fuel emission scandal. Top player Hyundai Motor shot up 2.44 percent to 168,000 won, with its auto parts-making affiliate Hyundai Mobis gaining 1.3 percent to 234,500 won.

In contrast, insurers and mobile carriers ended lower. Samsung Life Insurance, the No. 1 life insurer here, slid 0.61 percent to 98,300 won.

SK Telecom fell 0.57 percent to 261,500 won following the start of its week-long business suspension in violation of local handset subsidy rules.

The local currency ended at 1,176.30 won against the greenback, up 9.0 won from Wednesday's close, largely due to the foreign buying, dealers said.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys rose 2.8 basis points to 1.596 percent and the return on the benchmark five-year government bonds gained 3.8 basis points to 1.761 percent. (Yonhap)