Kospi Expected to Recover by Year-End on Policy Reforms and Stronger Won
South Korea’s stock market, which has been weighed down by a prolonged summer correction, is projected to rebound toward the end of the year. Analysts point to upcoming policy reforms and a stronger Korean won as key drivers that could help restore momentum to the Kospi index.
The Kospi has faced pressure over the past two months due to a strong U.S. dollar and lingering uncertainty around domestic tax rules, raising investor concerns about another bearish phase in the second half of the year.
Market experts highlight two major factors for a potential recovery: an appreciating Korean won and government-led reforms to improve stock market conditions. The won, currently trading near ₩1,400 against the dollar, may strengthen if the U.S. Federal Reserve shifts toward monetary easing later in 2025.
Additional external support could come from outcomes of the APEC summit, including possible progress in U.S.-China relations, a removal of China’s ban on Korean cultural exports, and developments in Russia-Ukraine ceasefire talks. These geopolitical factors could help lift investor sentiment.
On the domestic front, the South Korean government is advancing a bill to allow separate taxation of dividend income. The measure, expected to be finalized in early October, would lower tax rates for certain high-dividend companies and is considered a market-friendly reform. Meanwhile, a controversial proposal to reduce the capital gains tax threshold for large shareholders appears to have lost momentum.
The dividend taxation reform could be approved by late this year or early next year, providing investors with greater clarity. Analysts believe that while global risks such as U.S. monetary policy and geopolitical tensions remain, the combination of a stronger won and supportive reforms may pave the way for a year-end Kospi rally.
