Breaking! South Korean Stock Market Suddenly Crashes!
South Korean Stocks Plunge

On August 1, South Korea’s stock market suddenly plummeted, with the KOSPI index dropping nearly 4%, leading losses in Asian markets and marking its biggest decline since early April. The reason was the government’s plan to raise taxes on businesses and investors, sparking caution toward one of the world’s hottest stock markets.

Under a proposal announced by South Korea’s finance ministry on Thursday, the threshold for capital gains tax on stock holdings will be lowered from 50 billion won (~$714,250) to 10 billion won, while transaction taxes will also increase. Additionally, the corporate tax rate will rise from 24% to 25%, reversing the previous administration’s tax cuts.

The plan has triggered a strong backlash among retail investors, with a nationwide petition demanding its immediate withdrawal rapidly gaining traction and public support.

Despite this, the KOSPI remains up over 30% year-to-date, ranking among the top performers in the world’s ten largest indices, buoyed by optimism over corporate governance reforms pushed by the new government. Previously, bullish investors had largely shrugged off similar tax adjustment discussions and U.S. tariff threats (South Korea agreed to a 15% tariff, among the lowest in Asia).

As of 11 a.m. Friday, a petition opposing the capital gains tax changes on the National Assembly’s public petition board had garnered over 17,000 signatures. If it reaches 50,000 within a month, it will be submitted to a standing committee for discussion.

Samsung Electronics, South Korea’s most valuable stock, fell for a second straight day after its earnings missed analyst expectations. Earlier hopes for progress in its memory chip and foundry businesses had driven the stock’s rebound over the past two months.

If market momentum falters, it will make President Lee Jae-myung’s ambitious goal of pushing the KOSPI to 5,000—over 50% above current levels—even harder. Part of Lee’s vision involves redirecting household wealth concentrated in real estate toward stocks.

Yoon Jung-in, CEO of Fibonacci Asset Management Global Pte, said, "Some companies reported disappointing earnings, and market focus is shifting to the government’s policy reforms, but the latest moves are shaking investor confidence." He added that the proposed taxes on dividends and stock trading were unexpected negative news.

U.S. and South Korea Agree to 15% Tariffs

Shortly before this, the U.S. and South Korea reached a trade deal imposing 15% tariffs on imports, including cars, while securing major Korean investments in U.S. energy and shipbuilding sectors.

Announced by U.S. President Trump and confirmed by South Korea, the deal brings one of the world’s largest exporters into America’s emerging trade framework while avoiding a 25% tariff a day before the deadline. It includes a $350 billion Korean fund for U.S. investments.

Similar to an earlier U.S.-Japan deal where Japan pledged $550 billion, Trump stated he would personally oversee the investments. U.S. Commerce Secretary Lutnick added that 90% of profits from both funds would return to America. However, details remain unclear, with Japan’s interpretation of investment terms differing from the U.S.