The benchmark Korea Composite Stock Price Index (KOSPI) closed up 0.9 percent at 1,937.75 points on Friday helped by strong export data in China and expectations that the United States and China will resume their negotiations in September.
This week, the main index shed 3 percent as investors remained jittery over the escalating trade feud between Washington and Bejing. The US designated China a currency manipulator Monday following the yuan's sharp plunge through the key 7-per-dollar mark.
The Chinese currency's weakness sent the KOSPI index to the lowest point in three years, and the Korean won also fell sharply as investors sought safe havens, such as the dollar, over emerging market currencies.
Next week, investors will keep an eye on how the trade dispute between the world's two biggest economies will unfold. They will also look at any new developments involving Japan's restrictions on exports to Korea, analysts said.
"Among others, the equities markets will be swayed by the yuan's movement next week. If Chinese authorities keep its currency at weaker than 7.5 per dollar in an escalated trade with the US, it will trigger a massive capital outflow from emerging markets," Kim Yong-gu, an analyst at Hana Financial Group, said.
Early this week, Japan officially announced the exclusion of South Korea from its "whitelist" of trusted trading partners that enjoy fast-track export clearance.
Japan didn't add to the list of tightly regulated items shipped to Korea on Thursday and approved the first shipment of restricted goods to Korea though it vowed to strictly implement export curbs against Korea as announced.
Still, analysts said Japan's economic retaliatory measures will continue to weigh on tech giants, such as Samsung Electronics Co. and other export-oriented stocks.
Brokerages forecast the KOSPI won't fall below the psychologically important 1,900 points this week as financial authorities have said it will take "swift and bold" steps if necessary to help stabilize the financial markets in case of sharp volatility. (Yonhap)