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Kospi falls as investors wary of tax revisions

Jan 23,2018
Seoul’s main bourse retreated on Monday, pushed down by foreign selling.

The benchmark Kospi closed at 2,502.11, down 18.15 points, or 0.72 percent, from the previous session.

Park Chun-young, an analyst at Daishin Securities, said the decline is due to recent tax revisions that would levy heavier capital gains taxes on foreign stock investors.

The Finance Ministry has announced tax code changes - set to take effect in July - to collect capital gains tax from foreign investors who own more than 5 percent stakes in locally listed companies. The previous threshold was 25 percent. Non-resident foreign investors and overseas companies are subject to the taxes.

The Finance Ministry said the changed measure would affect only a limited number of foreign investors whose countries do not have tax agreements with Korea. For nations that do have agreements with Korea, the principle is for investors to be taxed in their country of residence.

Kim Ye-eun, an analyst at IBK Securities, said the U.S. government shutdown has worsened investor sentiment.

Foreign investors offloaded 176.5 billion won ($164.15 million) on Monday while institutional investors net sold 71.6 billion won in local stocks. Retail investors scooped up 193.3 billion won.

By sector, electrical and electronics shares declined 2.0 percent. Communications fell 1.8 percent and steel shares pushed down 1.4 percent. Securities shares also went down 1.1 percent.

Market bellwether Samsung Electronics shed 2.19 percent to close the day at 2,412.000 won. SK Hynix, a chipmaker, also went down 3.00 percent to 71,100 won.

Top financial shares also were in negative terrain.

KB Financial Group, Korea’s top financial holding company by asset size, fell 2.09 percent to 65,700 won. Shinhan Financial Group stepped down 2.08 percent to 51,800 won.

Kia Motors, the second-largest auto company by sales, nudged down 0.88 percent to 33,750 won.

However, Hyundai Motor, the top automotive company in Korea, nudged up 0.31 percent to 162,500 won while parts maker and affiliate Hyundai Mobis inched up 0.94 percent to 269,500 won.

The local currency closed at 1,070.10 won against the U.S. dollar, down 4.20 won from the previous session’s close.

The yield on three-year government bonds rose by three basis points to 2.20 percent. The return on 10-year bonds increased one basis point to 2.65 percent.

BY CHOI HYUNG-JO, YONHAP [choi.hyungjo@joongang.co.kr]