The KOSDAQ closed at 854.47, up 55.66 points, or 7.0 percent. Its bigger sibling KOSPI added 40.89 points to close at 6,299.66, up 0.7 percent, with the advance built on utilities, defense, shipbuilding and battery names rather than semiconductors.
The broader spread of gains came as a speculative frenzy in single-stock leveraged products showed signs of fizzling out, easing one source of the extreme swings that had increasingly distorted the benchmark.
The VKOSPI, often dubbed Korea's fear gauge, closed at 69.55 on Monday, down 8.0 percent on the day and 19.3 percent from 86.18 on July 30, the final session before regulators tightened rules on single-stock leveraged and inverse products.
It was down more than 25 percent from a recent intraday peak of 93.27 on July 29 and slipped below 70 during Monday's session for the first time since May 28.
The volatility gauge, which measures the market's expected 30-day swings based on KOSPI 200 options, had surged as Samsung Electronics and SK hynix came to account for more than half of the main board's market capitalization and leveraged products tied to individual stocks amplified moves in both directions.
Regulators responded on July 31 by raising the minimum deposit required for leveraged trading to 30 million won from 10 million won and tightening rules on when proceeds from stock sales can count toward that requirement.
Trading value in single-stock leveraged products has since collapsed, falling to 845.2 billion won on Aug. 7 from 12.45 trillion won on July 30.
The cooling suggests the market is beginning to shed some of the leverage-driven volatility that accompanied its semiconductor-heavy surge, allowing price adjustments and fresh buying to spread more evenly across sectors.
Foreigners sold heavily into Monday's advance. Net foreign selling on the main board reached 1.49 trillion won ($1.05 billion), against net buying of 893.1 billion won ($629.4 million) by individuals and 574.2 billion won ($404.6 million) by institutions.
The Korea Exchange briefly suspended program buy orders on the KOSDAQ early in the session after junior-market futures and the KOSDAQ 150 index both jumped more than 6 percent. It was the third such halt on the junior market this month.
Traders read the buying as a bet on U.S. rate cuts, with softer American employment data reviving expectations that the Federal Reserve will move lower before year-end. Biotechnology and small-cap semiconductor equipment names led the KOSDAQ advance.
The two large-cap chipmakers stayed nearly flat. Samsung Electronics closed at 230,000 won ($162.08), down 1,000 won or 0.4 percent. SK hynix ended at 1,420,000 won ($1,000.63), off 2,000 won or 0.1 percent.
Both had been pressured on Friday by reports that Nvidia is weighing lower memory content in its next generation of graphics processors.
Elsewhere on the main board, the bid was broad. HD Hyundai Heavy Industries rose 5.1 percent to 532,000 won ($374.9), Hanwha Aerospace gained 5.0 percent to 1,152,000 won ($811.8), Hyundai Motor added 3.2 percent to 408,000 won ($287.5) and Doosan Enerbility climbed 3.6 percent to 79,900 won ($56.3).
KB Financial was among the few large-cap losers, down 2.3 percent at 171,700 won ($121.0).
Regional markets ran with the same rate-cut trade. The Nikkei 225 closed at 66,970.22, up 2.1 percent, with Recruit Holdings surging 22.8 percent to 16,165 yen and chip tester Advantest up 6.4 percent at 34,260 yen. Mitsui Kinzoku fell 13.6 percent to 27,855 yen.
The composite index in Shanghai finished modestly higher at 3,961.02, up 0.5 percent.
The won weakened to 1,419.10 per dollar, 8.10 won softer than the previous session.
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