South Korean shares rebounded Thursday as investors delayed their liquidation of option-related positions despite the option expiry, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 19. 02 points, or 1.03 percent, to close at 1,864.57. Trading volume stood at 471.02 million shares worth 5.31 trillion won (4.59 billion U.S. dollars).

The KOSPI started higher, but turned into negative terrain during the morning session as investors were weighed by concerns over Europe's debt crisis. The global credit appraiser Fitch Ratings urged the European Central Bank (ECB) to purchase more government bonds in a bid to save Italy and prevent a "cataclysmic " euro collapse.

The key index, however, shifted into positive terrain, and extended its gains throughout the session on hopes that the U.S. economy was continuing its moderate recovery trend. According the Federal Reserve's beige Book, the U.S. economic activity increased "at a modest to moderate pace" in the last month of 2011.

There have been big worries about the possible selling spree on the option expiry, but investors delayed their liquidation of option-related positions as prices of reversal, or the position taken by selling index futures, buying call options and selling put options, soared during the trading.

"There were unexpectedly no liquidation of option-related positions as foreign investors took to the sidelines. Long arbitrage position was expected to be massively liquidated, but that was estimated to be delayed to the next month's option expiry, " Lee Choong-ho, a derivatives analyst at Dongyang Securities in Seoul, told Xinhua.

Long arbitrage traders built up huge conversion, or the position taken by buying index futures, selling call options and buying put options, in a bid to liquidate their arbitrage positions, but the conversion was offset by the reversal after the prices of reversal rose sharply during the trading, Lee said.

Lee warned that if the market basis, or the difference between spots and index futures, plunges down the road, the long arbitrage positions would be liquidated abruptly, triggering massive selling spree on the main bourse.

Foreign and institutional investors led the market rebound. Foreigners bought a net 145.4 billion won worth of local shares, with local institutions purchasing stocks worth 135.5 billion won.

Retail investors, who pulled down the KOPIS into the negative terrain during the trading, sold a net 275.6 billion won worth of shares in a bid to lock in profits.

Large-cap shares ended bullish. Market bellwether Samsung Electronics rose 0.69 percent to 1,028,000 won, and top steelmaker POSCO gained 1.04 percent to 389,000 won. The country's No.1 carmaker Hyundai Motor climbed 1.1 percent to 229,500 won on expectations for positive fourth-quarter earnings, and its affiliate Kia Motors added 1.33 percent to 68,600 won.

The local currency closed at 1,158.2 won against the greenback, up 0.5 won from Wednesday's close.

Bond prices ended mixed. The yield on the liquid three-year treasury notes closed unchanged at 3.38 percent, but the return on the benchmark five-year government bonds added 0.01 percentage point to 3.51 percent.