RTRS:Seoul shares rally on U.S. data, euro zone liquidity boost
* Investors celebrate positive U.S. data, ECB liquidity move
* KOSPI recovers level prior to Kim Jong-il's death
* Foreign investors buy to snap two straight days of selling
By Joonhee Yu
SEOUL, Dec 21 (Reuters) - Seoul shares rose sharply on Wednesday, as strong U.S. data and moves to bolster long-term liquidity in the euro zone boosted investor risk appetite and eased worries about instability following the death of North Korean leader Kim Jong-il.
"The market was clearly enjoying the news from Europe, where the commencement of the ECB's long term repo operation helped provide a fresh wave of cheap loans to the region's credit-starved banks," said Cho Byung-hyun, a market analyst at Tong Yang Securities.
"This should help alleviate worries about the region's liquidity crunch, and signs of recovery in the United States further supported investor confidence," he said.
A sharp rise in U.S. home starts and construction permits in November indicated the U.S. housing market may have entered a stage of stable recovery.
The European Central Bank's first ever offer of three-year loans is expected to draw strong demand and provide a fresh stimulus to the European bond and money markets.
Sources with close ties with Pyongyang and Beijing said that North Korea may shift to a system of collective rule between North Korea's new leader Kim Jong-un and his uncle, but there were no signs of an unfolding crisis on the Korean peninsula.
The Korea Composite Stock Price Index (KOSPI) ended up 3.09 percent to close at 1,848.41.
Foreign investors bought a net 286.3 billion won ($246.4 million) worth of shares, snapping a two-day selling streak, while instutional investors purchased a net 127.4 billion won worth.
The KOSPI has now recouped all of its losses since the death of Kim Jong-il on Monday, pulling above Friday's close of 1,839.96.
Bank shares spearheaded the rally. Shinhan Financial Group led the pack with a 6.3 percent gain as market analysts expressed positive views about the firm's earnings growth.
Shipping firms were close behind, with Hyundai Merchant Marine soaring 4.53 percent after the company announced that it agreed with five other transportation firms to create one of the largest container vessel networks in the Far East-Europe trade lane.
Refinery shares jumped as oil prices rose on hopes of economic recovery, stoking expectations of higher prices for petrochemical products.
SK Innovation, the parent of South Korea's largest oil refiner, rose 4.23 percent while S-Oil, the country's third-largest refiner, soared 5.32 percent.
Large-cap technology shares lent strong support to the day's surge, with tech giant Samsung Electronics, the largest stock on the KOSPI, advancing 4.45 percent and LG Electronics climbing 4.81 percent.
The KOSPI 200 index rose 3.28 percent, while the junior Kosdaq market advanced 2.25 percent.
