Kospi Drops 3.1% as Tax Hike Proposal Sparks Sell-Off

The Korean benchmark stock index, Kospi, experienced its largest decline since April, falling by 3.1%. This significant drop was triggered by the government's proposal to increase taxes on corporate and stock investments, aiming to boost revenue. The decline was primarily driven by a substantial decrease in the share price of SK Hynix, which fell by more than 5%, exerting the most significant drag on the Kospi index. Additionally, Hanwha Aerospace saw a 7% drop, further contributing to the overall market decline.

The proposed tax hike has raised concerns among investors about the potential impact on their returns, leading to a sell-off in the market. The government's move to increase capital gains tax is part of a broader effort to address fiscal challenges and reduce the budget deficit. However, the proposed tax increase has sparked criticism from business groups and investors, who argue that it could deter investment and slow economic growth. The government has defended the proposal, stating that the additional revenue generated from the tax hike will be used to fund public services and infrastructure projects.

The market reaction to the tax proposal highlights the sensitivity of investors to changes in tax policy and the potential impact on their investment decisions. The decline in the stock market index reflects the uncertainty and concern among investors about the future direction of the economy and the potential impact of the proposed tax changes. The Kospi index led the decline in Asia, with the MSCI Asia Pacific index also experiencing a drop of 0.4%. According to the proposal released by the Ministry of Economy and Finance, the highest corporate tax rate would be raised from 24% to 25%.