Korea’s stock markets rallied on Monday along with other Asian bourses as fears of Greece’s exit from the eurozone receded after pro-bailout parties won enough seats to control parliament.

The Korean won gained against the U.S. dollar for the fourth trading day in a row.

Financial authorities in Seoul breathed a sigh of relief at the Greek election results, but warned that financial risks in Europe still persisted.

The Financial Services Commission and the Financial Supervisory Service discussed the impact of the Greek election results on local financial markets and how to respond in an emergency meeting on Monday.

The pro-bailout New Democracy party’s win abated uncertainties in the global financial markets, but political instability still remains in Greece with the possibility of a renegotiation of the terms for the bailout, and as the parties take steps to form a coalition government, according to the FSC and the Finance Ministry.

“There still are risk factors in Europe such as the bailout process of Spanish banks, degrading of European banks’ credit ratings and the upcoming deadline for their recapitalization,” the FSC said in a statement.

“The FSC will therefore hold on to its crisis management system while closely watching major developments at the G20 summit, the European Union’s meeting of finance ministers and summit talks.”

The FSC and the Finance Ministry said they will keep monitoring the foreign capital flows in and out of the country as well as the financial situations of local companies.

Despite avoiding Greece’s imminent exit from the eurozone, the European crisis is expected to prolong the global economic slump and deal a blow to Korea’s exports, a think tank under the Korea International Trade Association said on Monday.

Considering the massive social and economic cost of Greek exit from the eurozone and the diplomatic cooperation expected at the G20 summit and EU summit later this month, Greece is unlikely to leave the eurozone, the KITA Institute for International Trade said in a report.

“Despite the higher possibility of Greece remaining in the eurozone, a declining demand for imports in Europe is inevitable due to the fiscal crisis, and Korea’s exports to the EU and China will fall,” said Hong Ji-sang, a senior researcher at the KITA IIT.

If the EU’s total imports drop 10 percent, Korea’s exports to the EU will fall 5.5 percent, the think tank said in the report.

Considering that 18.7 percent of China’s total exports are made to the EU, if China’s exports to the EU slide 10 percent, Korea’s exports to China will dip 4.9 percent, it said.

The benchmark Korea Composite Stock Price Index climbed 1.81 percent to close at 1,891.71 points on Monday. The tech-heavy KOSDAQ surged 1.61 percent to 475.26 points.

The won-dollar exchange rate shed 8.5 won to 1,157.1 won per dollar at market close.

By Kim So-hyun (sophie@heraldcorp.com)