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Stocks

South Korean stocks dented by planned tax hike

Government targets 129 big companies, triggering profit concerns

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The logo of Samsung Electronics is seen in front of its building in Seoul.   © Reuters

HONG KONG -- Major South Korean companies, including Samsung Electronics, saw their share prices slide on Thursday, the day after the government unveiled a plan to raise taxes for big corporations and wealthy individuals.

The government intends to hike rates for 129 companies with a net profit of over 200 billion won ($177 million) from the current 22% to 25%.

Fears of a profit squeeze put shares in those companies under selling pressure.

Samsung, which logged a group net profit of over 22 trillion won for the year ended December, shed 3.8% at one point, while chipmaker SK Hynix, tech company Naver, steelmaker Posco, KB Financial Group and Korea Electric Power were also sold.

The benchmark KOSPI index dropped over 2% during morning trade.

The tax reform plan comes after President Moon Jae-in announced on July 25 an economic policy that gives priority to "distribution" that will boost income and jobs. The tax increases are designed to fund that policy.

But the market had already priced in the progressive president's focus on reducing income inequality and redistributing wealth, one market player said. The tax plan was also out in the open by last week.

That may explain why Hyundai Motor and cigarette maker KT&G erased early losses and made gains after initial selling ran its course.

Some investors apparently took advantage of the announcement of the tax plan to sell their holdings and lock in profits amid record high stock prices.

The plan was unveiled just before trading ended Wednesday but had little impact on major issues at the time.

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