South Korean shares closed higher Tuesday on hopes of an economic recovery that offset renewed concerns over political tensions between the world's two largest economies. The Korean won fell against the US dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 14.85 points, or 0.71 percent, to close at 2,108.33. Trading volume was moderate at about 700 million shares worth some 11.6 trillion won ($9.7 billion), with gainers outnumbering losers 594 to 252.

Foreigners sold a net 72 billion won, and retail investors offloaded a net 165 billion won. Institutions bought a net 240 billion won, snapping their nine-session selling streak.

The index's rise was mostly attributed to hopes of a recovery, along with a counter-sentiment that followed a sharp fall in the previous session, according to an analyst.

"The Korean stocks are on a rebound in resistance to the large fall from the previous session, but the hike will be limited due to the growing (global economic) uncertainties," Kiwoom Securities analyst Seo Sang-young said.

US Commerce Secretary Wilbur Ross said on Monday (US time) that regulations for providing preferential treatment to Hong Kong over China were suspended.

The index got off to a strong start, thanks to a record gain in pending home sales in the US.

Positive economic indices also helped offset fears of economic setbacks stemming from the recent surge in new coronavirus cases.

Most large caps closed higher.

Market bellwether Samsung Electronics added 0.76 percent to 52,800 won, with No. 2 chipmaker SK hynix surging 1.79 percent to 85,100 won.

Top pharmaceutical firm Samsung BioLogics retreated 1.15 percent to 775,000 won, while leading chemical maker LG Chem gained 0.20 percent to 490,500 won.

The local currency closed at 1,203.00 won against the US dollar, down 4.40 won from the previous session's close. 

Most bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys stayed flat at 0.842 percent, while the return on the benchmark five-year government bond increased 1.6 basis points to 1.111 percent. (Yonhap)