South Korean stocks spiked 1.13 percent Wednesday as investors' sentiment was heightened by upbeat economic data from China, analysts said. The local currency fell against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) gained 21.13 points to close at 1,887.49. Trading volume was moderate at 378.4 million shares worth 3.97 trillion won ($3.54 billion) with gainers outpacing losers 498 to 296.

Analysts said the rise came as foreign direct investment to China rose 20.12 percent on-year in June, indicating an economic recovery of the world's No. 2 economy. China is the biggest trading partner for South Korea.

Earlier in the day, Seoul shares lost ground as investors continued to sit on the sidelines ahead of U.S. Federal Reserve Chairman Ben Bernanke's speech on monetary policy.

Bernanke will deliver his semi-annual testimony on monetary policy to the U.S. Congress later this week.

Also, investors are concerned over local listed firms' earnings for the second quarter, which may curb the market's gain down the road.

"Investors are still cautious about local firms' earnings as Samsung Engineering posted a short fall for the second consecutive quarter this year," said Bae Sung-young, a researcher at Hyundai Securities Co.

Samsung Engineering, South Korea's industrial plant builder, said Tuesday that it posted a net loss of 92.8 billion won in the April-June period. Its shares fell 2.93 percent to 69,500 won Wednesday.

Foreign investors purchased more shares than they sold at a net 116.5 billion won, and institutions also scooped up a net 241 billion won. Individual investors, on the other hand, offloaded a net 353.5 billion won.

Market behemoth Samsung Electronics added 1.69 percent to 1,320,000 won, and top chipmaker SK hynix added 0.53 percent to 28,600 won. Flat panel maker LG Display gained 0.54 percent to 27,800 won.

Carmakers led the market gain, with Hyundai Motor adding 2.82 percent to 219,000 won and its affiliate Kia Motors climbing 1.36 percent to 59,700 won. Top auto parts maker Hyundai Mobis gained 1.18 percent to 257,500 won.

STX Group's troubled shipbuilder STX Offshore & Shipbuilding gained 5.73 percent to 3,505 won on the rising hope for a normalization of the company. STX Heavy Industries also added 1.74 percent to 2,045 won.

Insurers also closed higher, with Samsung Fire & Marine Insurance rising 1.89 percent to 108,000 won and Hanwha Life Insurance moving up 2.54 percent to 6,870 won.

The local currency ended at 1,121.60 won against the greenback, down 3.60 won from Tuesday's close as investors took a wait-and-see approach on the future U.S. policy moves, dealers said.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasuries edged up 0.01 percentage point to 2.89 percent and the return on the benchmark five-year government bonds gained 0.02 percentage point to 3.16 percent. (Yonhap News)