Decision fuels foreign buying, pushes benchmark index to record high
South Korea’s benchmark index Kospi surged to a record high on Monday, surpassing the 3,400-point threshold for the first time following the government's decision to maintain the current threshold on capital gains tax.
On Monday, the Kospi closed at 3,407.31, up 11.77 points, or 0.35 percent, from the previous session, marking its highest closing level on record.
After opening at 3,407.78, the index continued its recent rally and quickly rose to an intraday record high of 3,420.23, before profit-taking briefly pulled it down to 3,391.33. A surge of foreign buying later helped the Kospi recover to fluctuate at slightly above 3,400.
Offshore investors net bought shares amounting to 266.7 billion won ($192 million), while retail investors and institutional investors each net sold shares worth 137.4 billion won and 137.6 billion won.
With the upbeat market, market heavyweights such as SK hynix and Samsung Electronics reached new highs.
SK hynix briefly exceeded 340,000 won during trading, setting a new all-time high of 341,500 won, while Samsung Electronics also hit a 52-week intraday high of 77,600 won.
SK hynix closed up 0.76 percent at 331,000 won, and Samsung Electronics ended the day 1.46 percent higher at 76,500 won.
The index’s new record high comes after the government decided to maintain the current 5 billion won threshold at which major shareholders are subject to capital gains tax, scrapping a reform plan to bring the threshold down to 1 billion won -- a move that would have tightened taxation -- taking investor backlash into account.
Under the current rules, only shareholders holding more than 5 billion won in a single listed company are defined as major shareholders and are subject to the tax, while those with smaller holdings remain exempt.
“Since the announcement of the tax reform plan in July, we have wrestled with the balance between normalizing capital gains taxation on major shareholders and the need to revitalize the capital market,” Deputy Prime Minister and Finance Minister Koo Yun-cheol said in a meeting between the ruling party and government on Monday, shortly before the stock market's opening.
“The government will continue to make every effort to support corporate and household economic growth through capital market development and productive finance.”
With Monday’s rally, the Kospi has marked new highs for four consecutive trading days, gaining 4.52 percent between Wednesday and Monday. The 3,400 level was reached just three trading days after the index surpassed the 3,300 mark for the first time in more than four years on Wednesday.
Despite the record rally, analysts expect the Kospi to remain relatively subdued in the near term.
“Further gains are expected to be limited, with the market having entered technically overbought territory, lingering tariff concerns and uncertainty ahead of the Federal Open Market Committee meeting,” said Lee Jae-won, an analyst from Shinhan Securities.
“The index is likely to trade in a narrow range ahead of the FOMC, with potential upside hinging on progress in tariff negotiations and the release of third-quarter corporate earnings next month.”
Lee Kyung-min, a researcher at Daishin Securities, said, “The effect of maintaining the major shareholder threshold was largely priced in during the recent rally.”
silverstar@heraldcorp.com
