KOSPI remains in trading range, raises concern over momentum in 2nd half

An electronic trading board shows the benchmark KOSPI closing at 3,225.66 points, up 0.04 percent, or 1.29 points from the previous session, at a Hana Bank dealing room in Seoul, Thursday. Yonhap

The benchmark KOSPI is raising concerns about whether it is losing upward momentum, after recording its steepest rally in 26 years during the first half.

So far this month, KOSPI has gained just 0.32 percent, trading sideways in a narrow range between 3,100 and 3,200 points. It currently ranks 22nd in performance among 30 major global indices.

This lackluster showing stands in stark contrast to the first six months of the year, when KOSPI surged 28.04 percent, its quickest growth since 1999 and the strongest among all 30 global markets.

Analysts said Sunday that the Korean stock market may lose steam for the remainder of 2025 unless the government delivers a consistent policy direction to address the longstanding “Korea discount” on valuations.

“A return to higher capital gains taxes clearly defied market expectations and is now weighing on investor sentiment,” Roh Dong-gil, an analyst at Shinhan Securities, said.

Roh was referring to the government’s recent tax code revision, which has drawn backlash from retail investors for reviving a controversial threshold on capital gains taxes.

Announced on July 27, the revision lowers the minimum taxable gains from the current 5 billion won ($3.59 million) to 1 billion won.

The measure, previously adopted under the 2017-22 Moon Jae-in administration, is part of President Lee Jae Myung’s broader effort to expand the tax base amid a shortfall in government revenue.

However, analysts argue that such tax policies have contributed to the chronic undervaluation of the Korean stock market, as large shareholders tend to offload shares toward the end of the year to avoid taxation.

These end-of-year sell-offs often drive the market downward, with retail investors — who now number an estimated 14.1 million — taking the brunt of the losses.

Roh noted that prior to the July 27 tax reform announcement, KOSPI had been on a bull run, having surpassed 3,000 points for the first time in nearly three and a half years on June 20.

This upward trend was fueled by Lee’s pledge to deregulate the market, and his administration’s stated goal of pushing KOSPI to an unprecedented 5,000 points during his five-year term, which began on June 4.

Jung Eui-jung, head of the Korean Stockholders Alliance, said that KOSPI’s meager 0.32 percent gain this month is “deeply concerning, especially given the favorable global market conditions.”

He pointed to Vietnam’s VN Index, which has surged 13.77 percent this month, while Japan’s Nikkei 225 and the U.S. S&P 500 rose 8.24 percent and 3.19 percent, respectively, over the same period.

“Both larger and smaller economies are outperforming Korea’s market,” Jung said. “That suggests KOSPI’s underperformance is due to internal, not external, factors.”

He added, “What the market needs is a clear assurance that the overall direction of stock market policy will remain consistent, and only with that consistency can the market regain upward momentum.”