S. Korean Stocks Rally on Potential Tax Incentives for Corporate with Higher Shareholder Returns

South Korea’s stock market rose on Wednesday following the government’s introduction of detailed tax incentives designed to push companies towards corporate reform through increased dividend payouts to shareholders.

The benchmark KOSPI ended the day up 0.47% at 2,794.01 points.

The government’s tax measures include cuts on corporate income taxes for companies that raise capital returns to shareholders, along with the implementation of separate taxes on dividends for shareholders at lower rates compared to other financial income.

This initiative aims to address the continuous undervaluation of South Korea’s market, attributed to factors like unclear corporate governance practices and low dividends, commonly referred to as the “Korea discount.”

These actions are part of the government’s “Corporate Value-up Programme,” which seeks to enhance the local stock market by incentivizing higher shareholder returns from listed firms. Notably, the Finance sector index surged by 1.05%, while the Securities sector index recorded a 1.82% increase, emerging as the top gainers among industry sectors.

However, analysts caution that uncertainties persist regarding the approval of the government’s proposed tax cuts by the parliament.