As expectations grow for lowering the top tax rate on separate taxation of dividend income, share prices of high-dividend stocks such as in finance and securities are rising.
According to the Korea Exchange (KRX), from on the 10th to the 13th, the KRX Securities Index rose 9.57% and the KRX Bank Index climbed 5.32%.
This is largely due to news that the ruling and opposition parties are discussing a plan to lower the top tax rate for separate taxation of dividend income from the government's proposal of 35% to 25%. If the tax cut is finalized, the burden of dividend income tax will ease, and the investment appeal of high-dividend stocks is expected to increase significantly. In addition, discussions on strengthening shareholder return policies, such as mandating cancellation of treasury shares, are also acting as a positive factor.
This trend is extending to high-dividend ETFs. According to the Korea Exchange (KRX) information data system, during the same period, the net asset value of the country's largest high-dividend ETF, "PLUS High-Dividend Stocks ETF," increased by about 77 billion won. This ETF invests in the top 30 domestic stocks by dividend yield, and financial and securities stocks showing recent gains, including ▲ Industrial Bank of Korea (IBK) ▲ Hana Financial Group ▲ Samsung Securities, are included at high weights. The ETF rose 6.52% over the same period.
Another related product, the "PLUS Treasury Share Buyback High-Dividend Stocks ETF," also rose 6.31%. This ETF was launched to target the benefits of policy changes such as mandating cancellation of treasury shares and separate taxation of dividend income.
A Hanwha Asset Management official said, "The 'PLUS High-Dividend Stocks ETF' is composed of corporations in which more than 80% of the assets fall under separate taxation under this tax reform plan," adding, "Demand to bundle stocks eligible for tax benefits into an ETF for investment led to fund inflows."
In fact, high-dividend ETFs have tended to grow quickly whenever they benefit from policy changes. In Feb., changes to the foreign tax credit system eliminated the tax deferral effect for overseas stock ETFs, making domestic dividend stock ETFs emerge as an alternative. As a result, the net asset value of the "PLUS High-Dividend Stocks ETF," which was about 454.7 billion won at the start of the year, surged to 1.7773 trillion won as of on the 13th, joining the "1 trillion won club."
Separately, there are also expectations that high-dividend funds could be included as eligible for separate taxation. Analysts say that if separate taxation is applied, another round of policy momentum (upside potential) could form for investments in high-dividend funds.
An industry official said, "If separate taxation is applied to high-dividend funds, investors can enjoy tax benefits through ETFs without checking individual stocks one by one."