South Korean shares soared to unprecedented heights on Monday, propelled by the government's decision to abandon a planned increase in capital gains tax on stock investments. The benchmark Korea Composite Stock Price Index (KOSPI) climbed 0.39% to close at a record 3,408.71 points, marking its tenth consecutive session of gains.

Government's Tax Decision Boosts Market Sentiment

President Lee Jae Myung's administration announced last week that it would not proceed with the earlier tax revision plan. The decision was made in response to concerns that the proposed tax hike could potentially undermine market performance. This move has been well-received by investors, as evidenced by the market's positive reaction.

Key Stock Performances

The market rally saw varied performances among major South Korean stocks:

Foreign Investment and Currency Impact

Foreign investors played a crucial role in the day's gains, emerging as net buyers with purchases worth 258.10 billion won. This influx of foreign capital underscores the attractiveness of the South Korean market to international investors.

The positive sentiment also extended to the currency market, with the Korean won strengthening 0.33% against the U.S. dollar, reaching 1,390.80 won per dollar.

Market Outlook

The government's decision to scrap the capital gains tax increase has been viewed as a supportive move for the stock market. By maintaining the current tax structure, the administration aims to preserve market stability and encourage continued investment in South Korean equities.

As the KOSPI reaches new heights, market participants will be closely watching for sustained momentum and any potential policy measures that could further bolster investor confidence in the South Korean market.

South Korean shares reached unprecedented heights as the KOSPI index surged to a record high, reflecting growing investor confidence in artificial intelligence (AI) technologies and domestic market reform initiatives.

KOSPI's Remarkable Rally

The KOSPI index climbed 1.07% to close at 3,379.90 points, marking its ninth consecutive session of gains. This impressive run culminated in the index's best weekly performance in over 18 months, with a substantial 5.5% increase for the week.

Chipmakers Lead the Charge

Semiconductor stocks were at the forefront of the rally, buoyed by global AI demand prospects:

SK Hynix's stock performance was particularly noteworthy following the company's announcement of completing internal certification for next-generation HBM4 chips and establishing production systems.

Government Support Boosts Market Sentiment

President Lee Jae Myung's decision to abandon plans for revising capital gains tax on stock investments played a crucial role in supporting market vitalization. This move was seen as a positive step towards fostering a more investor-friendly environment.

Foreign Investment and Currency Strength

The bullish sentiment was further reinforced by:

• Foreign investors emerging as net buyers, injecting 352.7 billion won into the market
• The South Korean won strengthening by 0.12% against the U.S. dollar

Automotive Sector Faces Challenges

While the overall market sentiment was positive, not all sectors shared in the gains:

This dip came after CEO Jose Munoz disclosed startup delays of two to three months at a U.S. plant construction site following an immigration raid.

Looking Ahead

The record-breaking performance of the KOSPI index, driven by AI optimism and market reforms, signals a robust outlook for the South Korean stock market. However, as seen with Hyundai Motor, individual company performances may vary based on sector-specific challenges and global factors.

Investors and market watchers will likely keep a close eye on the continued development of AI technologies, government policies, and global economic trends as they shape the future trajectory of South Korean equities.