[SEOUL] South Korean shares hit a record high on Wednesday (Sep 10), boosted by investors’ hopes for President Lee Jae Myung’s plan to reverse a tax hike proposal following a backlash, and so energise the domestic stock market.
The benchmark Kospi stock index rose as much as 1.75 per cent to 3,317.04 points in afternoon trade, surpassing its previous record of 3,316.08 on June 25, 2021.
Optimism grew over Lee’s “Kospi 5,000” initiative after his secretary, Kang Hoon-sik, said the president would unveil his stance on revising rules on capital gains taxes for stock investors at a press conference on Thursday.
Last month, the Kospi snapped a four-month rally after the government’s proposed tax hikes on stock investments sparked investor doubts over Lee’s pledge for market reforms, prompting the government and the ruling party to reassess the scheme.
The proposal envisioned a rise in taxes on stock transactions to return them to the 2023 level of 0.2 per cent from 0.15 per cent now, and lower the threshold for ‘large shareholders’ subject to capital gains taxes to 1 billion won (S$924,468), from 5 billion now.
The Kospi’s rally this year started in April when former President Yoon Suk Yeol was removed from office after attempting to impose martial law, resolving political uncertainty, further fuelled by investor optimism around Lee’s market reform pledges.
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Major reforms passed by Lee’s administration include amending the Commercial Act to expand the duty of board members to better protect shareholder interests and setting up a task force to win an upgrade to developed market status from a global index provider, with improvements to foreign access.
The Kospi has risen 38 per cent this year, outperforming Wall Street’s major stock indices and Tokyo’s Nikkei, also at their record highs, as well as the broader Asian market.
Wednesday’s rally was led by strong foreign inflows of more than US$836.55 million of share purchases.
Among sub-indexes, securities firms jumped 3.4 per cent and major financial groups climbed 2.9 per cent, leading the benchmark higher.
Index heavyweights Samsung Electronics and SK Hynix also jumped 1.6 per cent and 5.5 per cent, respectively, buoyed by optimism that the chipmakers would enjoy strong demand from a boom in artificial intelligence technologies. REUTERS
