South Korean shares on Monday posted their best session since early 2020, as authorities re-imposed a ban on short-selling through the first half of 2024 to promote a "level playing field".

The benchmark KOSPI rose 134.03 points, or 5.66%, to 2,502.37. It was the index's biggest one-day gain since March 25, 2020.

On Sunday, South Korea's financial authorities decided to re-impose a ban on short-selling shares this week until end-June.

Short-selling, which involves selling borrowed shares to buy back at a lower price and pocket the difference, was partially allowed in South Korea until last week only on large-cap stocks included in the KOSPI200 and KOSDAQ150 indices. The market-wide ban implemented in 2020 had not been fully lifted since then.

This is the fourth time the country has implemented a ban on short-selling after 2008, 2011 and 2020, when major financial events shook global markets. This time, the regulator's decision was in response to a series of short-selling violations by foreign firms.

"There were strong foreign inflows for short-covering," said Na Jeong-hwan, analyst at NH Investment Securities. "That aside, market conditions are becoming more favourable for foreign inflows with stabilisation of the U.S. dollar and Treasury yields."

The KOSPI outperformed the broader Asian market's rally on a slowdown in U.S. employment growth. The MSCI Asia Pacific index , excluding Japan, rose 2.1%, while Japan's Nikkei climbed 2.4%.

Battery maker LG Energy Solution surged 22.76%, while peers Samsung SDI and SK Innovation gained 11.45% and 13.42%, respectively. Battery materials makers LG Chem and POSCO Holdings each rose 10.62% and 19.18%.

Tech giant Kakao, which hit record lows last week amid heightened regulatory scrutiny, rose 8.23%. Its affiliates Kakaobank and Kakaopay jumped 16.59% and 11.70%, respectively.

On the main board, foreigners bought local stocks worth 703.8 billion won ($542.19 million), their biggest daily purchase since May 26.

The junior KOSDAQ, comprising mainly of technology stocks, closed up 7.34%, after triggering a sidecar trading curb during the session. ($1 = 1,298.0800 won) (Reporting by Jihoon Lee; Editing by Sonia Cheema)