South Korean stocks rallied 2.96 percent Wednesday as investor sentiment was boosted by rising hopes for further economic stimulus measures by the Chinese government.

The local currency rose sharply against the U.S. greenback.

The benchmark Korea Composite Stock Price Index rose 55.52 points to 1,934.2. Trading volume was moderate at 509.2 million shares worth 5.2 trillion won ($4.37 billion), with gainers far outnumbering losers 767 to 64.

"The Chinese optimism swelled up around the globe and drove up the South Korean market," said Lee Kyung-min, a market analyst at Daishin Securities Co. "Global financial markets were in a good mood last night and the KOSPI joined it."

On Tuesday, China's trade data showed a 5.5 percent fall in outbound shipments and a 14 percent plunge in imports, fueling fears that a slowdown in the Chinese economy is faster than what has been forecast.

The sharper-than-expected drop in trade, however, raised hopes that Beijing would come up with more powerful stimulus measures to prevent a hard landing for the world's No. 2 economy.

U.S. stocks finished higher, with the Dow Jones industrial average jumping 2.42 percent and the tech-laden Nasdaq Composite rising 2.73 percent.

"Still, the stock market will be on a roller-coaster ride until the U.S. Federal Reserve's September meeting, when it makes a key rate decision," said the analyst.

Foreign investors dumped a net 145.6 billion won worth of local shares, extending their selling streak to 25 sessions, while institutions scooped up a net 519.5 billion won.

Most shares ended in positive territory, led by gains in techs, oil refiners and brokerages.

Samsung Electronics, the world's largest handset maker, jumped 1.41 percent to 1,147,000 won and No. 2 chipmaker SK hynix rose 3.6 percent to 36,000 won.

Leading oil refinery firm SK Innovation soared 6.47 percent to 98,800 won and No. 3 S-Oil vaulted 5.71 percent to 59,200 won.

Brokerage houses finished bullish, with industry leader NH Investment & Securities surging 8.28 percent to 9,550 won and runner-up Daewoo Securities flying 9.1 percent to 12,100 won.

The local currency closed at 1,189.4 won against the U.S. dollar, up 11.5 won from Tuesday's close, falling below the psychologically important 1,200-won line for the first time in just two sessions, on revived demand for risky assets. The won-dollar rate surpassed the 1,200-won mark on Monday for the first time in five years.

Bond prices, which move inversely to yields, ended lower. The yield on three-year Treasurys rose 1.2 basis points to 1.680 percent, and the return on the benchmark five-year government bonds gained 1.6 basis points to 1.869 percent. (Yonhap)