South Korean stocks bounced back Thursday from the previous day's 20-month low as the US Federal Reserve's minutes indicated cautious optimism over the economy's long-term prospects, despite impeding rate hikes. The Korean won gained ground against the US dollar.

The Korea Composite Stock Price Index (KOSPI) rose 42.26 points, or 1.84 percent, to close at 2,334.27. Trading volume was moderate at 333 million shares worth 7.54 trillion won ($5.89 billion) with gainers outstripping decliners 726 to 152.

"The Fed expressed optimism about the economy and anticipated that it's on track for moderate second-quarter growth, easing recession worries," said Seo Sang-young, an analyst at Mirae Asset Securities Co.

The Fed minutes of its June policy meeting, released Wednesday (US time), showed that the Fed needs to raise the interest rate by another 0.5-0.75 percentage point this month and an even larger rate hike could be necessary if inflation persists.

The Fed officials noted that a sharp rate hike is still appropriate even if it means it would slow the economy and showed optimism about the economy in the long-term, although they lowered the gross domestic product forecast to 1.7 percent for 2022 from the earlier estimate of 2.8 percent.

In Seoul, blue-chip tech stocks led KOSPI's gain.

Market behemoth Samsung Electronics soared 3.19 percent to 58,200 won after releasing the earnings preview indicating it likely logged the best second-quarter earnings in four years.

Leading chemical firm LG Chem rose 3.56 percent to 524,000 won and battery maker Samsung SDI climbed 3.64 percent to 541,000 won.

Cosmetics company LG Household & Health Care advanced 4.38 percent to 715,000 won.

Platform giant Kakao was among the decliners, falling 0.68 percent to 73,000 won. Financial stocks were also bearish, with major banking firm Shinhan Financial losing 1.13 percent to 35,050 won.

The local currency ended at 1,299.80 won against the US dollar, up 6.5 won from Wednesday's close. (Yonhap)