Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, said Tuesday that the KOSPI, which has been setting record highs, still has room to rise further, noting that "the Korean stock market remains lower than those of developed countries." On the potential reintroduction of the financial investment income tax amid the market rally, he took a cautious stance, saying "market conditions must be sufficiently established."
At a press briefing held at the Sejong Government Complex that day, the deputy prime minister said, "The KOSPI has climbed to an all-time high and market capitalization has risen from 13th to 7th in the world, but on a price-to-book ratio (PBR) basis, the Korean stock market is still lower than those of developed countries."
The PBR, calculated by dividing share price by book value per share, indicates that lower readings mean a company's stock is undervalued relative to its assets. Korean equities have long traded at lower PBRs than developed-market peers due to low shareholder return ratios and governance issues, with the so-called "Korea discount" cited as a chronic problem.
Koo said, "The semiconductor industry outlook depends on how the artificial intelligence (AI) cycle unfolds," adding, "Considering that pre-orders and advance purchases have already been made at least through next year, global investors are investing based on the potential they see in the Korean stock market."
On the possibility of reintroducing the financial investment income tax amid the market boom, he was guarded, saying, "The financial investment income tax was abolished in 2024" and "it is a task to be reviewed when market conditions, including the capital market environment, are sufficiently established."
Regarding the government's sale of part of the inheritance tax payment-in-kind shares of NXC, the holding company of Nexon, he described it as "a successful divestment."
"If the management premium had not been recognized, the price could have fallen below what the government received as payment in kind, but selling at a higher price carries significant meaning," Koo said.
However, he said the roughly 1 trillion won in cash secured through the sale is not likely to flow into the sovereign wealth fund. "Legislation for the sovereign wealth fund is currently being pushed forward," he said, adding, "Even if it passes the regular parliamentary session, the proceeds from the NXC payment-in-kind share sale cannot yet be transferred to the sovereign wealth fund."
On the possibility of raising property taxes on non-resident and high-value homes, he said, "We are listening to opinions from the public across various fields," and emphasized expanding housing supply to dispel concerns about properties being pulled from the market. "We will strengthen our focus on supply through the Sept. 7 and Jan. 29 real estate measures," Koo said. "We are making efforts to maximize supply and to expand it by identifying and addressing difficulties in each of the already designated districts."
On the outlook for excess tax revenue from the semiconductor boom, he said, "We expect more to come in due to the semiconductor industry cycle and the stock market rally," but signaled that specific figures would be announced through the corporate tax prepayment in August.
The oil price cap will remain in place for the time being until the situation in the Middle East stabilizes. Asked whether the cap would be maintained until the Middle East war ends, he said, "We need to watch oil prices," adding, "If oil prices fall significantly, we will need to consider lifting the price cap."
He gave himself positive marks on the current inflation situation, saying, "It appears to have been managed relatively well compared with major countries," and attributed the outcome to policies including the price cap. "Based on March, which allows for international comparison, Korea's inflation rate was 2.2%, while the United States stood at 3.3%, the European Union (EU) at 2.8%, and the United Kingdom at 3.4%," Koo added.
He projected this year's economic growth rate to exceed 2.0%, citing first-quarter real gross domestic product (GDP) growth of 1.7%, which beat market expectations, and recent upward revisions by major investment banks (IBs). "By how much it will exceed 2% will become clearer once we see the strength of the semiconductor boom and the impact of the Middle East war," he said, adding that detailed projections would be presented in the second-half economic growth strategy to be announced in June.
Separately, on the dispute between Samsung Electronics (005930.KS) and its labor union over bonuses, Koo called for an amicable resolution, saying, "At a crucial time when the entire world is coming to Korea to secure semiconductor chips because they cannot find them elsewhere, it would be unfortunate for labor-management discord to cause us to miss this opportunity ourselves."
