Financial stocks rally as gov’t unveils potential tax benefits

[Graphics by Song Ji-yoon]

Financial stocks had a strong start to the day in early morning trade on Wednesday thanks to the government’s plan of providing tax support for shareholder returns.

As of 9:32 a.m., KB Financial Group on the Kospi is trading at 75,000 won ($56.05), up 3.45 percent from the previous day’s close, Shinhan Financial Group (up 2.40 percent), Hana Financial Group (up 3.75 percent), and Meritz Financial Group (up 1.00 percent) are all experiencing increases.

The government announced its intention to provide corporate tax reduction for companies engaging in share buybacks or increasing dividends, part of its value-up policy, on the previous day. It also mentioned providing tax benefits to shareholders receiving dividends.

“In order to encourage more companies to participate in expanding shareholder returns such as dividends and share buybacks, we will alleviate corporate tax burdens on a certain portion of the increased shareholder return amount,” Finance Minister Choi Sang-mok said at a meeting the previous day.

Finance Minister Choi Sang-mok

“Even after reflecting losses from equity-linked securities (ELS), the transfer of loan loss reserves will lead to an increase in net income attributable to controlling shareholders this year, and dividend per share and expanded shareholder returns will continue,” BNK Investment Securities analyst Kim In said in a comment on banking stocks.

In contrast, some companies’ stock prices plummeted as the regular shareholder meeting season approaches and their audit reports are delayed.

As of 9:25 a.m. Alchera is trading at 5,260 won, down 12.33 percent from the previous trading day, on the Kosdaq market. Alchera announced a delay in its audit report submission and Setopia, which similarly disclosed a delay in completing external audits the previous day, is down by 9.86 percent. EDGC also fell by 6.99 percent after announcing a delay in submitting its audit report.

According to the External Audit Act, external auditors must submit audit reports to companies at least one week before the regular shareholders’ meeting and companies must immediately disclose them. Among the 1,684 December book-closing listed enterprises, 700 companies will hold regular shareholders’ meetings on March 28th, 2024.