South Korean Markets Rally on Dual Catalysts
South Korean financial markets witnessed a significant upswing on Monday, with the benchmark KOSPI index surging more than 2%. This robust performance was primarily fueled by renewed optimism in the artificial intelligence sector and growing expectations of favourable tax reforms concerning dividend income.
AI Enthusiasm and Financial Stocks Lead Charge
The trading session saw the KOSPI jump by 103.07 points, or 2.61%, to reach 4,056.83 by 0145 GMT. Market sentiment received a major boost from comments made by Nvidia CEO Jensen Huang over the weekend. He confirmed that the semiconductor giant is experiencing "very strong demand" for its advanced Blackwell chips, effectively calming recent investor anxieties surrounding the AI sector.
According to Seo Sang-young, an analyst at Mirae Asset Securities, Huang's statement played a pivotal role in revitalizing market confidence. The positive newsflow directly benefited major chipmakers, with index heavyweight Samsung Electronics gaining 2.15% and its peer SK Hynix soaring 4.66%.
Tax Reform Prospects Fuel Additional Gains
Concurrently, the financial sector emerged as another top performer, propelled by speculation of potential tax cuts. A spokesperson for the ruling Democratic Party indicated on Sunday that tax rules on dividend income should be "reasonable". This view was echoed by Presidential Chief of Staff Kang Hoon-sik, who acknowledged the need to respond to various opinions, strongly hinting at a possible reduction in dividend income taxes.
This discussion follows the government's earlier proposal in September to separately impose taxes on dividend income at a maximum rate of 35%. The prospect of a more lenient tax regime led to a substantial rally, with the financial sector index advancing 3.94% and securities firms surging 4.74%.
The broad-based market strength was evident as 786 out of 926 traded issues advanced, while only 120 declined. Reflecting the positive sentiment, foreign investors were net buyers of shares worth 49.8 billion won.
Currency and Bond Markets Respond
The positive momentum extended to other financial instruments as well. The Korean won strengthened against the US dollar, quoted at 1,453.8 on the onshore settlement platform, marking a 0.53% appreciation from its previous close of 1,461.5.
In the debt markets, December futures on three-year treasury bonds gained 0.07 point to 105.95. Consequently, the most liquid three-year Korean treasury bond yield fell by 2.1 basis points to 2.873%, while the benchmark 10-year yield declined by 1.4 basis points to 3.208%.
