South Korean shares rebounded Tuesday from a decline of over 1 percent the previous session, largely due to investors' bargain hunting for undervalued heavyweights and the government's record budget proposal for next year. The Korean won rose against the US dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 23.38 points, or 1.01 percent, to close at 2,349.55.

Trading volume was high at about 1.1 billion shares worth some 16.1 trillion won ($13.6 billion), with gainers outnumbering losers 567 to 279.

Foreigners dumped a net 209 billion won, selling for a fourth consecutive session, while retail investors purchased a net 241 billion won. Institutions offloaded a net 55 billion won.

"Investors seem to have taken on a bargain hunting drive after stocks sank yesterday due to the Morgan Stanley Capital International (MSCI) index rebalancing," said Lee Young-gon, an analyst at Hana Financial Investment.

Local analysts also said investor sentiment strengthened as the government proposed a record 555.8 trillion-won ($469.8 billion) budget for 2021.

A recent surge in new COVID-19 cases, however, still poses a risk for local financial markets.

The country's total caseload surpassed the 20,000 mark for the first time since the country reported its first case on Jan. 20.

In Seoul, most large caps traded higher.

Market bellwether Samsung Electronics added 0.37 percent to 54,200 won, with No. 2 chipmaker SK hynix edging up 0.13 percent to 75,200 won.

Internet portal giant Naver went up 0.62 percent to 324,500 won, while its rival Kakao lost 1.35 percent to 401,500 won.

Leading chemical maker LG Chem gained 0.41 percent to 743,000 won, and EV battery maker Samsung SDI advanced 0.44 percent to 454,500 won.

Top pharmaceutical company Samsung Biologics rose 0.39 percent to 781,000 won, and Celltrion added 0.34 percent to 298,000 won.

Hyundai Motor, the country's largest automaker, jumped 1.98 percent to 180,000 won, and top steelmaker POSCO gained 1.08 percent to 186,500 won.

The local currency was trading at 1,183 won against the US dollar, up 4.8 won from the previous session's close.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys rose 3.7 basis points to 0.977 percent, and the return on the benchmark five-year government bond added 6.3 basis points to 1.273 percent. (Yonhap)