[Market Focus] Disappointing 'Separate Dividend Taxation' Plan... Securities Stocks Plunge Across the Board

Securities stocks plunged together in the early session on August 1. As the government's tax reform plan fell short of market expectations, a flood of sell orders hit the market.

As of 10:22 a.m. on this day, Shin Young Securities was trading at 119,400 won, down 8,500 won (6.65%) from the previous trading day.

Securities stocks took a direct hit on this day. Bookook Securities (-6.14%), Hanwha Investment & Securities (-5.12%), Yuanta Securities (-4.58%), Daishin Securities (-4.31%), DB Financial Investment (-4.01%), SK Securities (-3.71%), Kiwoom Securities (-3.71%), Mirae Asset Securities (-3.67%), Samsung Securities (-3.53%), and Korea Financial Holdings (-3.15%) were all trading lower.

The previous day, the Ministry of Economy and Finance announced that it would introduce a system next year to separate the taxation of dividend income from high-dividend companies from comprehensive income. However, disappointment grew as the government adopted a 35% top tax rate plan, not the 25% rate the market had hoped for. The effective tax rate, including local taxes, reaches 38.5%.

Other unfavorable provisions also dampened investor sentiment. The standard for major shareholders subject to capital gains tax on stocks was lowered again from 5 billion won to 1 billion won per stock, thereby expanding the taxable base. In addition, as the financial investment income tax is abolished, the securities transaction tax rate, which had been reduced to 0.15% this year, will be raised again to 0.20%.

Han Jiyeong, a researcher at Kiwoom Securities, cited the following domestic factors for the sharp intraday decline in the KOSPI: negative assessments of the Korea-US mutual tariff negotiations; disappointment over the tax reform plan; and a natural correction after recent gains.

Han explained, "In particular, since the latest tax reform plan includes stricter capital gains tax requirements, large-cap KOSPI stocks with heavy individual investor inflows, as well as KOSDAQ stocks where individual investors have a high share, are showing weak performance."