Will the KOSPI break its all-time high?... Spotlight on capital gains tax major shareholder rule decision [Weekly Outlook]

"If the 5 billion won major shareholder condition for capital gains tax is maintained

The KOSPI may even break through the 3,300 level"

Korea-U.S. summit scheduled for the 25th

Shipbuilding and semiconductor stocks expected to benefit

'Strategic Flexibility' reignited after 19 years

Entertainment and cosmetics stocks likely to experience increased volatility

According to the securities industry, the domestic stock market is expected to fluctuate this week (18th-22nd) as it digests uncertainties related to the government's tax reform measures. If the criteria for major shareholders subject to stock capital gains tax are revised as part of the tax overhaul, the market could gain additional upward momentum. Analysts also note that ahead of the Korea-U.S. summit, sectors expected to benefit—such as shipbuilding and defense—may come to the fore.

On the last trading day of last week, the KOSPI closed at 3,225.66, up 0.04% according to Korea Exchange. The index has hovered around the 3,200 level this month and has struggled to break through the psychologically significant 3,300 mark. If the KOSPI rises another 2.47%, it will reach the all-time record close of 3,305.21.

The rally has lacked direction, mainly due to policy uncertainty from the government. Previously, the Ministry of Economy and Finance announced at the end of last month a tax reform plan to lower the major shareholder threshold for stock capital gains tax from the current 5 billion won per stock to 1 billion won. With doubts forming over the government's commitment to bolster the market, subdued investor sentiment has yet to improve.

This week, a decision on the scope of major shareholders for the capital gains tax—which has weighed on the market—could set the future direction of the index. On the YouTube channel 'Saenal' on the 13th, Democratic Party floor leader Byungki Kim said, regarding a possible adjustment to the major shareholder threshold, "I expect the government to reach a decision early this week," adding, "There is public support to restore the threshold to 5 billion won, and both the Presidential Office and the government will review and decide."

Seongcheol Park, a strategist at Yuanta Securities, commented, "A decision on the major shareholder criteria will remove uncertainty; if it's maintained at 5 billion won, the market will breathe a sigh of relief and gain further upward momentum."

In addition, attention is advised for industry sectors that may benefit from the upcoming Korea-U.S. summit, according to analysis. As per the Presidential Office, the summit is scheduled for the 25th. President Jaemyung Lee will visit the U.S. from the 24th to the 26th at the invitation of President Donald Trump. Presidential spokesperson Yujeong Kang stated, "The two leaders are expected to discuss strengthening their partnership in economic cooperation—particularly in semiconductors, batteries, shipbuilding, advanced technology, and critical minerals—based on the recently concluded tariff negotiations."

Park, the Yuanta Securities strategist, predicted that "amid expectations of cooperation in the manufacturing sector ahead of the Korea-U.S. summit, sectors such as shipbuilding and semiconductors could be influenced by news flow."

Dooeon Kim, a researcher at Hana Securities, noted, "Investment in shipbuilding could accelerate," adding, "A rise in defense spending (3.8% of GDP) would lead to a revaluation of the defense sector’s valuation (stock price relative to earnings)."

However, some analysts say the discussion of expanding the strategic role of the Korea-U.S. alliance (strategic flexibility) at the summit reduces expectations for the lifting of China's '限韓令' (the ban on Korean Wave imports). The anticipated beneficiaries of the lifting of the ban—entertainment, content, and cosmetics stocks—could thus become more volatile.

Kim remarked, "The revival of 'strategic flexibility' after 19 years dampens expectations for the lifting of the Korean Wave ban by China," adding, "If the government voices support for strategic flexibility after the summit, volatility may increase in industries such as entertainment, cosmetics, and duty-free shops."

Jungsam Ko, Hankyung.com reporter jsk@hankyung.com