South Korean shares closed sharply higher Monday on hopes of massive economic stimulus steps sought by the local government. The Korean won fell against the US dollar amid the growing tension between the United States and China.

The benchmark Korea Composite Stock Price Index (KOSPI) gained 24.47 points, or 1.24 percent, to close at 1,994.60. Trading volume was moderate at about 630 million shares worth some 7.84 trillion won ($6.3 billion), with winners outnumbering losers 517 to 303.

The index got off to a firm start on renewed hopes of a vaccine for the new coronavirus.

Dr. Anthony Fauci, director of the US National Institute of Allergy and Infectious Diseases, said the US was on track to develop new coronavirus vaccines by late December at the earliest.

"Fauci's evaluation (of COVID-19 vaccine development) was the largest driving force in today's gains," NH Investment & Securities analyst Noh Dong-kil said.

"Although the US-China dispute dragged down Wall Street last week, China's emphasis on US commitment for the phase-one trade agreement has given investors the impression that the tussle will not lead to a tariff bomb," Noh added.

Investor sentiment was further lifted after South Korean President Moon Jae-in told his government to push for a third and possibly largest-ever supplementary budget.

"The bottom of the global economy is invisible. This is indeed an economic wartime situation," the president said in an annual national fiscal strategy meeting.

Foreign investors sold a net 142.1 billion won, becoming net sellers for a second consecutive session. Institutions and individuals purchased a net 36 billion won and 97 billion won, respectively.

Most large caps closed in positive terrain.

Market kingpin Samsung Electronics rose 0.21 percent to 48,850 won, and No. 2 chipmaker SK hynix added 0.12 percent to 81,400 won.

Top automaker Hyundai Motor soared 1.59 percent to 96,000 won, while its smaller affiliate Kia Motors advanced 1 percent to 30,400 won.

Internet portal giant Naver spiked 4.56 percent to 241,000 won, with its local rival Kakao jumping 8.50 percent to 268,000 won.

The local currency closed at 1,244.20 won per dollar, down 7.20 won from the previous session's close.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasurys shed 2.2 basis points to 0.815 percent, while the return on the benchmark five-year government bond slipped 3.2 basis points to 1.050 percent. (Yonhap)