The Korea Composite Stock Price Index closed above the psychologically important 2,000 point level on Wednesday powered by foreign buying. It was the first time in three months that the KOSPI breached 2,000.
The index slid to 1,989 points in morning trade as insurers and institutional investors sold shares, but foreign buying dragged it back up to close at 2,003.85, up 0.5 percent from Tuesday.
The last time the KOSPI surpassed 2,000 was on May 31.
Foreigners bought around W680 billion (US$1=W1,087) worth of stocks, continuing 14 consecutive days of purchases. Over the last two weeks, foreigners have bought W5.2 trillion worth of Korean stocks.
Analysts say Korean stocks are still undervalued and the country's economic fundamentals are stronger than those of other emerging countries, leading to projections of continued foreign buying.
But uncertainties like the phase-out of quantitative easing by the U.S. Federal Reserve prompt skeptics to doubt whether the KOSPI can stay above 2,000 points for long.
"Since the end of August, foreigners have accounted for more than 12 percent of daily trade in money terms," said Lee Jong-woo I'M Investment & Securities. "What we are seeing is a continuation of a phenomenon that usually takes place for just four days a year. If the KOSPI is to stay above 2,000 points, concerns over low growth must disappear and the economy needs to recover."