KOSPI Index Hits Record High as YTD Rally Extends to 42%

South Korea’s KOSPI index surged to a new record high, marking its tenth consecutive session of gains. The benchmark closed at 3,407.31, up 0.35%, propelled by a confluence of favorable policy decisions and growing investor confidence in the nation's economic outlook.

The KOSPI’s ascent reflects a year-to-date rally of approximately 42%, underpinned by strategic government initiatives aimed at enhancing the investment climate. A major catalyst has been the government's decision to scrap a planned increase in capital gains taxes on stock investments.

This reversal, announced by Finance Minister Koo Yun-cheol, seeks to boost investor sentiment and stimulate activity in the equities market by addressing the persistent “Korea discount.” The government aims to enhance stock valuations and attract greater domestic and foreign investment through the deferral.

Beyond tax policy, the administration is pursuing corporate governance reforms designed to improve shareholder returns. Proposals include amendments to the commercial code to strengthen directors' accountability to shareholders. The government is also considering reducing taxes on higher dividend income, measures designed to make the South Korean stock market more appealing to investors by promoting transparency and increasing returns.

Further bolstering key sectors, the government has established a $34 billion policy fund managed by the state-run Korea Development Bank. This fund will provide low-interest loans and strategic investments to companies in sectors such as semiconductors, automotive, and biopharmaceuticals over the next five years. The initiative is designed to enhance the competitiveness of domestic firms amid increasing global competition and protectionist measures.

The small-cap Kosdaq index also experienced positive momentum, closing at 852.69, a 0.66% increase. This indicates a broader market optimism, extending beyond the large-cap segment.