South Korea’s Kospi index climbed to a record high on Friday after President Lee Jae-Myung’s administration announced a delay to a planned increase in capital gains tax. The move eased investor concerns about equity inflows and strengthened confidence in the government’s commitment to market stability.
Policy shift boosts sentiment
The capital gains tax rise, initially scheduled for this year, had been widely criticised by investors who feared it would curb domestic participation and deter foreign funds. The government’s decision to postpone the measure lifted equities across the board, with the Kospi gaining nearly 1% in early trading. Market analysts described the policy shift as a pragmatic step aimed at stabilising investor confidence.
Corporate reform agenda continues
Despite the tax delay, the administration reaffirmed its intention to pursue structural reforms in corporate governance. Proposed changes to the commercial code include stricter accountability for company directors and measures to improve shareholder returns. These initiatives are part of efforts to address the so-called “Korea discount,” where Korean conglomerates trade at lower valuations due to governance concerns and weak dividend policies.
Technology stocks rally
The technology sector, particularly semiconductor and AI-related companies, led the rally. Strong global demand for advanced chips and optimism around artificial intelligence continue to support valuations. Analysts noted that easing tax concerns could attract renewed foreign investment into Korea’s globally competitive tech sector.
Risks and trade-offs
While investors welcomed the announcement, economists warned that deferring the tax rise could create fiscal pressures by reducing government revenues. Others cautioned that the rally may outpace fundamentals if concrete timelines for reform are not delivered. Nonetheless, the broader consensus is that delaying the tax has provided short-term stability at a critical juncture.
Looking ahead
The focus now shifts to how quickly the government can implement corporate reforms and sustain investor trust. With South Korea’s equity markets at historic highs, policymakers face the challenge of balancing fiscal responsibility with the need to maintain competitiveness in an increasingly globalised financial landscape.
Newshub Editorial, 12 September 2025
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