South Korean stocks are expected to trade higher this week on the back of rising hopes for the government’s envisioned extra budget plan to bolster the local economy, analysts said.

The benchmark Korea Composite Stock Price Index closed up 56.18 points, or 2.88 percent, to 2,004.89 on Friday from the previous week.

Earlier last week, the KOSPI advanced on the eased concerns over the eurozone as Cyprus reached a final deal on Monday to receive a bailout worth 10 billion euros ($12.82 billion) to prevent its banking system from defaulting.

However, the growth was limited due to the rising tension with North Korea. South Korean troops placed on the highest “Jindogae 1” alert on Wednesday after discovering an “unidentified object” in the border fence.

The KOSPI recouped losses later in the week following the government’s announcement that it will draw up an extra budget as part of its efforts to resuscitate the slowing economic recovery.

Weekly foreign net selling totaled 354.4 billion won ($318.9 million), and retail investors offloaded 617 billion won. In contrast, institutions scooped up a net 981.3 billion won.

Analysts said the KOSPI is expected to trade higher next week amid the government’s new stimulus plans, although listed firms’ stagnant earnings for the first quarter may weigh down on investors’ sentiment.

“The KOSPI is anticipated to rise this week, narrowing its growth gap with the U.S. stock market,” said Han Chi-hwan, an analyst at KDB Daewoo Securities Co. “Techs, builders and bank shares are expected to gather ground.”

Shares traded higher across the board last week, with machinery firms adding 5.5 percent. Construction and technology shares advanced 4.4 percent and 4.3 percent, respectively. In contrast, medical shares shed 0.8 percent. (Yonhap News)