Korean stocks hit a new record high on Wednesday, driven by Federal Reserve Chairman Powell's overnight signals of potential further interest rate cuts.

The Korea Composite Stock Price Index (KOSPI) surged 2.68% to close at 3,657.28 points, breaking through the 3,650-point threshold for the first time.

Daily trading volume reached 538.8 million shares with a turnover of 13.7 trillion won (approximately $9.6 billion). A total of 759 stocks advanced while 127 declined.

Institutional investors and foreign investors emerged as net buyers, purchasing 751.8 billion won and 162.7 billion won worth of stocks respectively. Retail investors were net sellers, offloading 970.5 billion won.

"The previous day, Fed Chairman Powell indicated that the Federal Reserve could soon end its quantitative tightening policy, which had a positive impact on financial markets," said Lee Kyoung-min, an analyst at Daishin Securities.

Powell stated on Tuesday local time that the Federal Reserve is approaching its goal of providing "ample" reserves to banks.

Investors also anticipate that new government measures to control housing prices in Korea could accelerate capital flows into financial markets.