Korean stocks closed 3.09 percent higher Wednesday as investors shifted their focus from North Korean leader Kim Jong-il's death to signs of economic improvement in Europe and the United States, analysts said. The local currency gathered ground against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) surged 55.35 points to 1,848.41, recovering losses following the communist leader's unexpected demise. Trading volume was moderate at 509.2 million shares worth 4.98 trillion won ($4.33 billion), with gainers outnumbering decliners 698 to 148.

"North Korean woes had a trivial impact on the financial market as investor fears of increased geopolitical risk on the Korean peninsula faded," said Kim Young-jun, an analyst at SK Securities Co.

The KOSPI had ended down 3.43 percent at 1,776.93 on Monday, following the official announcement of the communist leader's demise.

"Positive housing data from the U.S. and a smooth sale of government bonds in Spain gave a boost to investor sentiment, raising hopes the European and U.S. economy will stabilize," Kim said.

U.S. government data on Tuesday showed that November home starts gained 9.3 percent on-month, reaching their highest level since April 2010.

Shares gathered ground across the board, with exporter blue chips leading the climb. Samsung Electronics, the world's top memory chip maker, rose 4.45 percent to 1,057,000 won and top auto-parts maker Hyundai Mobis added 3.42 percent to 302,000 won.

Oil refiners gathered ground as global oil prices trended higher. Industry leader SK Innovation advanced 4.23 percent to 148,000 won and No. 3 player S-Oil jumped 5.32 percent to 105,000 won.

Financials closed higher on hopes the positive economic signs in Europe and the U.S. will help ease risks over Europe's debt-ridden bank sector. KB Financial Group, the parent of South Korea's leading bank, gained 4.34 percent to 37,300 won and No. 3 banking group Shinhan Financial Group soared 6.3 percent to 40,500 won.

In contrast, food maker Nongshim closed 0.62 percent down at 240,500 won, after surging for two straight sessions amid heightened fears over a power struggle in North Korea.

The local currency ended at 1,147.7 won against the greenback, up 14.5 won from Tuesday's close, amid the KOSPI's rise and easing concerns over North Korean risks, dealers said.

Bond prices, which move inversely to yields, closed slightly higher. The yield on three-year Treasuries slipped 0.02 percentage point to 3.36 percent and the return on the benchmark five-year government bonds also fell 0.02 percentage point to 3.51 percent. (Yonhap)