South Korean stocks surged 2.57 percent on Wednesday, cheered by Beijing's surprise rate cut which helped reduce risk-averse sentiment in the financial market, analysts said. The local currency rose against the U.S. dollar.

The benchmark Korea Composite Stock Price Index soared 47.46 points to 1,894.09, moving higher for a second straight session. Trading volume was moderate at 445.6 million shares worth 6.8 trillion won ($5.7 billion), with gainers dwarfing decliners 741 to 100.

Wednesday's rally was largely driven by institutional investors. Foreigners, who had been dragging down the KOSPI in recent sessions, extended their selling to a 15th consecutive session with a net sell-off of local stocks worth 3.7 trillion won over the period.

It marks their longest selling mode since an 18-session selling streak in May 2012.

"In addition to China's moves, the fact that South Korea is not a raw material exporter and that the won has been recently depreciating against other major currencies made the KOSPI rebound sharply," said Han Yo-seop, an analyst at Daewoo Securities.

The Korean won had performed relatively strong against other currencies this year, which was feared to hurt the price competitiveness of local exporters and further weigh on slumping trade.

Han expected the KOSPI to be less affected by Chinese woes going forward as "roughly 90 percent of such concerns have been factored in the index."

On Tuesday, the People's Bank of China cut interest rates by a quarter percentage point and said it will free up cash for banks in an attempt to allay concerns over growth in the world's second-largest economy.

Large caps were mixed. Cosmetics giant AmorePacific jumped 6.02 percent to 361,000 won and steelmaker POSCO moved up 4.55 percent to 184,000 won.

Lotte Shopping surged 8.66 percent to 251,000 won after the group announced its launch of a task force aimed at improving corporate governance and handling the initial public offering of Hotel Lotte.

Hyundai Merchant Marine, the operator of the now-stalled tours to North Korea's Mt. Kumgang, spiked 22.51 percent to 8,600 won in anticipation of improved ties between the two Koreas.

Seoul and Pyongyang on Tuesday reached a dramatic agreement on defusing heightened military tensions between the two countries after days of intensive high-level talks.

In contrast, market bellwether Samsung Electronics slumped 1.11 percent to 1,067,000 won.

Financial shares also ended in negative territory, with Shinhan Financial Group shedding 1.37 percent to 39,650 won.

The local currency closed at 1,186 won against the U.S. dollar, climbing for a second straight session. Wednesday's 9.3-won gain marks the biggest daily gain since a 16.8-won spike on Aug. 13.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys rose 1.1 basis points to 1.719 percent and the return on the benchmark five-year government bonds gained 2.7 basis points to 1.9 percent. (Yonhap)