South Korean stocks closed higher Monday on hopes that China may come up with new stimulus measures to prop up its slowing economy, following its rate cut late last week. The local currency dropped sharply against the U.S. dollar.

The benchmark Korea Composite Stock Price Index gained 7.68 points, or 0.38 percent, to finish at 2,048.08. Trading volume was moderate at 449.8 million shares worth 4.26 trillion won ($3.76 billion) with advancers outstripping decliners 425 to 375.

Analysts said investors' eyes are on whether Beijing will use a fresh measure to boost its sluggish economy at the end of its key Five-Year Plan policy meeting that runs through Thursday.

China's Central Committee is expected to announce the country's 2016 growth outlook at the 6 percent range. Asia's biggest economy is heading for a below 7 percent expansion in 2015, for the first time in 25 years.

"We're seeing a global rally as China and the eurozone are set to pump in more liquidity, driving up the local stock market.

Whether such a rally will continue will depend on the result of the FOMC meeting later this week," said Bae Sung-young, an analyst at Hyundai Securities Co.

While the U.S. Federal Reserve is forecast to keep the rate unchanged for this month, some market pundits are not ruling out a possible fresh indication of a rate hike at the Federal Open Market Committee meeting due to end Wednesday (U.S time).

Foreigners and institutions drove up the index with a net buying of 159 billion won and 2.1 billion won, respectively, while individuals unloaded a net 162.4 billion won.

Domestic-oriented sectors finished bullish. Leading logistics firm Hyundai Glovis shot up 3.3 percent to 235,000 won, with top mobile carrier SK Telecom adding 1.6 percent to 254,000 won.

Top-cap Samsung Electronics edged up 0.23 percent to 1,292,000 won, and Hyundai Motor also rose 0.63 percent to 159,000 won.

Builders and banks, however, closed lower. Hyundai Development tumbled nearly 6 percent to 53,500 won, and state-run Industrial Bank of Korea fell 1.73 percent to 14,200 won.

The local currency ended at 1,133.80 won against the greenback, down 9.1 won from Friday's close.

Bond prices, which move inversely to yield, closed higher. The yield on three-year Treasurys slipped 0.5 basis point to 1.645 percent and the return on the benchmark five-year government bonds fell 1.2 basis points to 1.799 percent. (Yonhap)