Korean stocks closed 1.56 percent higher Thursday as signs of recovery in the U.S. housing market prompted investors to snap up shares following a sharp fall in the previous session, analysts said. The local currency climbed against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) jumped 28.05 points to 1,822.96, rebounding from a 1.48 percent decline on Wednesday. Trading volume was moderate at 482.3 million shares worth 4.6 trillion won ($4 billion), with gainers outnumbering decliners 534 to 276.

"The housing starts data signaled a recovery in the U.S. property market," said Kim Young-jun, an analyst at SK Securities Co.

U.S. government data showed that U.S. builders broke ground on the most new homes and apartments since October 2008. The upbeat data came after an index on Tuesday showed that home builder confidence jumped to a five-year high.

"The KOSPI also made a quick recovery from losses that were triggered by Pyongyang's surprise announcement on Wednesday. The incident simply generated some noise in the market," said Kim.

Technology shares led the gains. Market bellwether Samsung Electronics added 3.55 percent to 1,195,000 won and NHN, the operator of South Korea's No. 1 portal, surged 5.91 percent to 269,000 won.

Autos lent support with top automaker Hyundai Motor rising 2.99 percent to 224,000 won and its auto-parts affiliate Hyundai Mobis advancing 4.55 percent to 287,500 won.

Energy companies closed bullish on the back of rising oil prices. Market leader SK Innovation rose 2.44 percent to 147,000 won.

Bank shares, however, bucked the gains as the anti-trade watchdog's widening probe on the local finance sector stoked concerns.

The Fair Trade Commission has launched an investigation into local brokerages and banks over allegations of fixing certificate of deposits rates. State-run Woori Finance Holdings slumped 4.07 percent to 10,600 won and smaller player Hana Financial Group lost 2.64 percent to 33,200 won.

The local currency ended at 1,139.1 won against the greenback, up 3.5 won from Wednesday's close on the back of the KOSPI's rise and lingering hopes of U.S. quantitative easing, dealers said.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasuries added 0.02 percentage point to 2.91 percent and the return on the benchmark five-year government bonds also rose 0.02 percentage point to 3.01 percent. (Yonhap)