Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
KOSPI surpasses 4,000 again on dividend income tax cut
An electronic trading board at Hana Bank headquarters in central Seoul shows the benchmark KOSPI closing at 4,073.24 points, Monday, up 3.02 percent from the previous session. Yonhap
By Yi Whan-woo
The benchmark KOSPI surged more than 3 percent to rebound above 4,000 points, Monday, supported by talks between the government and ruling party a day earlier on lowering the maximum tax rate on stock-derived dividend income.
The index ended at 4,073.24 points, up 3.02 percent from Friday, when it slipped below 4,000 for the first time in 10 trading days after reaching an unprecedented high on Oct. 27.
The market opened at 3,991.87 points and picked up momentum, briefly rising to 4,092.91 points before easing back to close.
The rebound came after a political consensus was reached Sunday to set the top rate at 25 percent on returns from stock dividends, as proposed by the ruling Democratic Party of Korea (DPK), compared to the government’s initial plan of 35 percent.
This builds on the government’s plan in July to tax stock dividends separately from other types of income, a move aimed at easing investor tax burden as companies would be encouraged to raise payouts, with the lower rate expected to further benefit investors.
The rally was led by institutional investors, who net purchased more than 1.3 trillion won ($895.19 million), while retail investors sold over 1.1 trillion won. Foreigners also offloaded more than 155 billion won.
Market bellwethers Samsung Electronics and SK hynix both surged past key thresholds of 100,000 won and 600,000 won, respectively. Samsung Electronics closed at 100,600 won, up 2.76 percent, while SK hynix ended at 606,000 won, rising 4.48 percent.
Leading carmakers also saw gains, with Hyundai Motor up 2.46 percent to 270,500 won and its sister company Kia rising 3.27 percent to 113,700 won.
Top battery makers LG Energy Solution and Samsung SDI climbed 0.43 percent to 465,500 won and 2.94 percent to 315,000 won, respectively.
The financial sector, considered a representative high-dividend stock category, also showed broad strength.
Among major financial holding companies, KB Financial rose 4.28 percent, Shinhan Financial gained 1.81 percent, and Hana Financial climbed 4.57 percent.
Brokerage firms performed strongly as well, with Shinyoung Securities up 9.54 percent, NH Investment & Securities up 10.14 percent and Eugene Investment & Securities up 8.6 percent.
Insurers followed suit, with Samsung Life Insurance up 4.54 percent and Samsung Fire & Marine Insurance rising 4.71 percent.
Analysts expressed optimism that the rally may particularly favor companies that maintain consistent dividend payouts.
“The stock market is being driven higher as the easing of separate taxation on dividend income has boosted banks and securities stocks, which are showing strong gains,” said Seo Sang-young, a researcher at Mirae Asset Securities.
Kang Song-chul, a researcher at Eugene Investment & Securities, said investors should focus on companies with solid recent quarterly earnings, reasonable valuations, and either a current dividend yield at 4 percent or higher or a large proportion of treasury stock.
“Many financial companies, including banks, insurers and securities firms, currently meet all three of these criteria,” he said.