Seoul shares snap 6-day winning streak after US tariff deal
The benchmark Korea Composite Stock Price Index lost 9.03 points, or 0.28 percent, to close at 3,245.44, after hitting a four-year high in the previous session.
Trade volume was heavy at 536.75 million shares worth 16.29 trillion won ($9.31 billion), with losers beating winners 466 to 405.
The index opened higher and had risen by about 1 percent after the two nations announced an agreement that would impose a 15 percent tariff on South Korean imports. US President Donald Trump earlier had threatened to impose a 25 percent levy.
But earlier gains were all pared on heavy selling by institutions.
Institutions sold a net 705.36 billion won worth of shares, while foreign and retail investors bought a net 344.41 billion won and 223.67 billion won worth of shares, respectively.
"Market uncertainties have eased, but the deal was somewhat expected and largely priced in," said Han Ji-young, a researcher at Kiwoom Securities. "Going forward, corporate strategies and export trends will likely affect the market."
Top-cap shares traded mixed.
Market bellwether Samsung Electronics fell 1.65 percent to 71,400 won, while chip giant SK hynix surged 3.8 percent to 273,500 won.
Major battery maker LG Energy Solution dipped 2.67 percent to 382,500 won, and leading pharmaceutical firm Samsung Biologics slid 2.82 percent to 1.07 million won.
Defense giant Hanwha Aerospace jumped 1.94 percent to 996,000 won, and nuclear power plant manufacturer Doosan Enerbility advanced 2.98 percent to 65,600 won. But No. 1 steelmaker Posco sank 1.44 percent to 308,500 won.
Carmakers lost ground amid concerns about the US' item-specific tariffs. Top automaker Hyundai Motor sank 4.48 percent to 213,000 won, while its sister Kia nose-dived 7.34 percent to 102,300 won.
But shipbuilders gathered ground on hopes for stronger cooperation with the US Leading shipbuilder HD Hyundai Heavy soared 4.14 percent to 490,500 won, and its rival Hanwha Ocean spiked 13.43 percent to 112,300 won.
The local currency was quoted at 1,387 won against the greenback at 3:30 p.m., down 3.9 won from the previous session. (Yonhap)
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Korea Herald
an hour ago
- Korea Herald
[Yoo Choon-sik] What South Korea must see beyond US tariff deal
South Korea's last-minute trade agreement with the United States — concluded just under two days before the deadline — has dominated headlines and conversations both domestically and internationally. The attention is understandable. Since the beginning of President Donald Trump's second term earlier this year, US tariff policy has emerged as one of the most destabilizing forces in the global economy. For South Korea — a country that relies heavily on manufacturing and exports — the stakes could not have been more critical. The agreement sets US tariffs on most South Korean exports at 15 percent, a significant reduction from the initially proposed 25 percent. As part of the broader deal, South Korea has committed to investing $350 billion in the United States, including a $150 billion shipbuilding fund. The remaining $200 billion will be funneled into strategic sectors including semiconductors, nuclear energy, secondary batteries and biotechnology. While further details are expected to be revealed at the forthcoming summit between the two nations' leaders, the contours of this investment commitment already signal a recalibration in South Korea's trade and industrial strategy. President Lee Jae Myung rightly hailed the deal as both a diplomatic and economic achievement. It not only lowers tariff burdens, but also removes a significant source of uncertainty. Yet while South Korea's export-led model has been the backbone of its 'economic miracle' over the past half-century, it leaves the country acutely vulnerable to shifts in global trade dynamics and foreign policy. In stark contrast to the robust manufacturing sector, South Korea's domestic service industries remain underdeveloped. Their contribution to national gross domestic product and employment continues to lag behind those of service sectors in most other advanced economies. A vibrant service sector provides a buffer against external shocks, encourages inclusive employment, enhances human development and supports long-term economic resilience. For countries like South Korea that aim for both sustained prosperity and social cohesion, building a stronger domestic service economy is not just a desirable policy goal — it is a strategic necessity. A recent report by the Bank of Korea offers a timely assessment of the nation's service sector. On the surface, there has been progress. Since the 1990s, the share of manufacturing value added in nominal GDP has plateaued in the mid-to-high 20 percent range. Meanwhile, the service sector has steadily expanded, accounting for 44 percent of nominal GDP as of 2024. The share of workers in manufacturing has declined steadily since peaking at 28 percent in 1989. By contrast, the service sector now accounts for 65 percent of all employed workers in the country. Since the 1990s, services have been the main engine of job creation, and this trend shows no signs of reversing. Since the mid-1990s, however, productivity in services has consistently lagged behind that of manufacturing, with minimal improvement over time. For more than 20 years, service sector productivity has remained stuck at just 40 percent of manufacturing productivity. Making service sectors more productive This imbalance is particularly striking when compared to other manufacturing-heavy economies. Even in Japan and Germany — nations with similarly strong industrial foundations — the productivity gap between services and manufacturing is notably smaller. The Bank of Korea identifies this chronic inefficiency as one of the primary structural bottlenecks constraining South Korea's long-term growth potential. The COVID-19 pandemic has only magnified these vulnerabilities. In the wake of the global health crisis, South Korea's economic growth rate has declined sharply relative to pre-pandemic levels. The primary driver of this slowdown has been the diminished productivity of the private service sector. This has serious implications. In a world increasingly shaped by knowledge, data and digital platforms, a country's capacity to generate high-value services is becoming as important as its ability to manufacture high-quality goods. While the US tariff deal provides welcome short-term relief, it must serve as a broader catalyst for economic transformation. South Korea now stands at a pivotal moment — facing mounting structural, demographic and geopolitical challenges. A new strategy is needed, and the Bank of Korea outlines three core imperatives. South Korea must establish a comprehensive legal and institutional foundation for industrial policy that reflects the convergence of manufacturing and services. Current regulatory systems are ill-suited to accommodate hybrid sectors and emerging business models. Bold regulatory reforms are needed to create space for innovation across sectors. South Korea has an enviable repository of intellectual assets, technical know-how and operational capabilities accumulated through decades of industrial leadership. This expertise should now be redeployed into developing AI- and data-driven industrial services. Areas such as digital content, telemedicine, logistics and smart manufacturing offer fertile ground for combining South Korea's technical strengths with global service demand. The country's economy is burdened by a disproportionately high number of small-scale, often involuntarily self-employed workers. Rather than attempting to shrink this sector, the government should expand the availability of quality jobs in larger, more stable firms. At the same time, institutional and financial support for startups and business transitions must be enhanced to inject vitality into the broader economy. As South Korea's president heads off on a well-deserved summer holiday, it is a fitting moment for reflection. The successful tariff agreement with Washington offers breathing room, but it must not foster complacency. Now is the time to convert a reactive diplomatic victory into a proactive economic strategy. South Korea must shift from a narrow export-dependent model to a more balanced and resilient growth paradigm, one that fully harnesses the potential of its service sector. The agreement with the United States must be the beginning of a new chapter — one in which external pressure sparks internal reform and short-term compromise paves the way for long-term renewal. With vision, discipline and courage, South Korea can turn this moment of relief into a lasting opportunity for transformation. The country has risen to great challenges before. It can — and must — do so again.
Korea Herald
15 hours ago
- Korea Herald
Foreign money returns to Kospi, piling into Samsung
Analysts forecast Kospi's rally to take pause in August amid market correction Foreign investors net purchased shares of over 6 trillion won ($4.3 billion) on the benchmark Kospi in July, driven largely by a massive 3.5 trillion won buying spree on the country's leading chipmaker, Samsung Electronics. Offshore investors bought a net 6.28 trillion won worth of local stocks on the main bourse Kospi in July, according to the data from the bourse operator Korea Exchange. It was the largest amount since the 7.86 trillion won net buying in February 2024. Since turning to a net buying stance in May, foreign investors have been scooping up shares on the Kospi for three consecutive months. Samsung Electronics was the top pick, drawing 3.5 trillion won in net foreign purchases, accounting for 56 percent of the monthly total. Giving further buying momentum was news that the company would manufacture AI chips for Tesla under a multiyear $16.5 billion deal, stoking hopes of a rebound in its loss-making foundry business. Hanwha Ocean followed, buoyed by expectations surrounding the Korea-US trade deal, with offshore investors net purchasing shares worth 858 billion won. The shipbuilder under the defense-to-energy conglomerate Hanwha Group is expected to anchor the Korea-US shipbuilding initiative 'Make American Shipbuilding Great Again.' Shares of SK Square (457 billion won), Isu Petasys (329 billion won) and Hanwha Aerospace (249 billion won) trailed behind as the next most purchased stocks. Marking a contrast with the buying rally for Samsung Electronics, offshore investors offloaded 193.1 billion won worth of SK hynix shares last month, following a bearish forecast from global banking giant Goldman Sachs. Naver was the most sold stock by foreigners during the period, as they dumped 668.2 billion won worth of shares last month. Major net sold stocks included Doosan Enerbility (243.8 billion won), Samsung SDI (206.8 billion won), Kakao Pay (184.5 billion won) and KB Financial Group (159.8 billion won). Meanwhile, the Kospi sank to 3,119.41 on Friday, down 3.88 percent from the previous session, marking its sharpest single-day drop in two months. The stock market was dampened by the government's tax code revision plan and the uncertainty associated with the US tariff talks. On the day, foreign investors offloaded shares worth 656 billion won on the Kospi. 'Investor sentiment weakened as expectations for US rate cuts receded. Foreign investors posted net selling of around 1 trillion won in both the spot and futures markets amid a stronger dollar,' analyst Park Ki-hoon from Korea Investment & Securities explained. 'The market experienced a sharp correction as a series of expectations quickly unraveled amid heightened macro uncertainty both at home and abroad,' said Lee Kyung-min of Daishin Securities. Despite the Kospi's bullish run in recent months, analysts anticipate a period of elevated volatility in August as the index steps into a phase of valuation correction. 'The conclusion of the Korea-US tariff negotiations, diminished expectations for US rate cuts, and lowered hopes for tax reform are factors weighing on the stock market," said Na Jeong-hwan, an analyst at NH Investment & Securities, projecting the Kospi to trade between 3,000 and 3,300 points this week. 'With a lack of earnings momentum in the domestic market, a short-term correction appears necessary. Volatility is expected to increase in August,' said Kyobo Securities analyst Kim Joon-woo, suggesting the Kospi could inch down to as low as 2,900 points this month.
Korea Herald
15 hours ago
- Korea Herald
Ruling party faces backlash on tax code revision
The ruling Democratic Party of Korea is facing backlash amid speculation that Friday's sharp drop in the Korea Exchange's main board Kospi may be associated with the Lee Jae Myung government's push to impose taxes on a wider scope of investors to address the tax revenue shortfall. On Sunday, Rep. Park Sung-hoon of the main opposition People Power Party said in a statement that the ruling bloc has "waged war against individual investors out of nowhere" through the proposed tax code revision, which he blamed for the Kospi's fall by 3.88 percent on Friday from the previous day's close, marking the sharpest decline in four months. About 99.17 trillion won ($71.36 billion) of market cap evaporated solely on Friday from 850 listed companies on the Kospi combined, according to the Korea Exchange, a day after the liberal administration on Thursday introduced a tax code revision to broaden the tax base. Also, over 90,000 people as of Sunday afternoon had signed an online petition posted just three days earlier Thursday to call on the ruling bloc to slam the brakes on the tax bill revision ― meeting the requirement of 50,000 signatures within 30 days for the matter to be brought to a parliamentary review. The proposed revision of the Income Tax Act indicates that those identified by year-end as stock investors holding at least 1 billion won in a listed company's shares will be levied a capital gains tax of at least 20 percent upon taking profits from selling shares until the end of the company's business year that follows. The same investor's losses in another company's stocks cannot be used to offset capital gains taxes from his or her profits, under South Korea's tax code. The online petitioner warned of a situation in which investors rush to sell off securities as the end of the year approaches ― even at a loss ― to offset capital gains tax, which it said would stymie the moderate rise of Kospi. "Is it realistic (to predict) that you'll be holding 1 billion won worth of shares (of a company by the year-end)? Most investors will begin selling shares when their stock holdings of a company begin to value about 700 or 800 million won," read the petition. Currently, those holding shares worth 5 billion won or more are imposed capital gains tax for their sales of securities. This follows the former administration's move by disgraced ex-President Yoon Suk Yeol to raise the bar for investors in South Korean companies to become a "major stockholder" under the Income Tax Act. In December 2023, the minimum threshold for a stock investor to be classified a "major stockholder" for capital gains taxation was raised to 5 billion won, up from the 1 billion won mark set in April 2020. "Am I paying (more taxes) because I'm holding a greater amount of stocks, not because I took bigger gains? If so, I'll surely exit the South Korean stock markets and turn to ones in the United States," the petition also read. The proposed tax code revision ― predicted to collect 35.6 trillion won in taxes ― also suggests that the securities transaction tax rate be raised from 0.15 percent to 0.2 percent. Na Jeong-hwan, a strategist at NH Investment & Securities, said in a note to investors Friday that fears of tax code changes "sparked questions about the government's policy to boost the stock market." The ruling bloc appears to have mixed views over the new tax code proposal. Democratic Party Rep. Jin Sung-joon, who leads the party's policymaking process, downplayed concerns that the tax code changes could stoke a bear turn in the stock market. Referring to an underperformance in domestic stocks under the Yoon administration, despite the eased capital gains tax rule, Jin said via Facebook on Saturday, "Many investors and experts are saying that if we change who is to be levied capital gains by rolling back (the tax relief of the Yoon administration) our stock market could experience a collapse, but precedents suggest otherwise." Presidential spokesperson Kang Yu-jung also played down a connection between the fluctuation in the stock market and the tax code revision announcement, saying in a briefing Friday that a cause-and-effect analysis on Friday's stock slide "must be carried out more delicately." However, before Friday's plunge, Rep. Lee So-young of the Democratic Party in a Facebook post Thursday raised doubts that those holding 1 billion won of stocks of a company should be deemed a major stockholder for capital gains taxation, adding that the move could disrupt investors, while the degree of increase in the tax revenue from the changes remains unclear. Rep. Kim Han-kyu of the Democratic Party also said Saturday that striking fairness in taxation schemes is important, but now is the time to focus on the Lee administration's campaign pledge for the Kospi to reach 5,000. The Kospi stood at 3,119.41 points at Friday's close.
