[비즈한국] The government has introduced various policies to revitalize stock investments and resolve the "Korea Discount." Recently, the ruling party has pushed for an amendment to the Commercial Act that would mandate the cancellation of treasury shares by corporations. Additionally, with plans to separate dividend income for taxation at a lower rate, attention is focused on whether financial stocks, which are considered the primary undervalued stocks in the market, will benefit.
The Democratic Party of Korea is pushing for an amendment to the Commercial Act that focuses on mandating the cancellation of treasury shares. Under the proposed amendment, if a company acquires treasury shares, it must cancel them within one year of the acquisition date. If they are not cancelled, the company's directors will be subject to a fine of up to 50 million won. However, a six-month grace period will be granted for treasury shares acquired before the amendment takes effect. The goal of the bill is to prevent some shareholders or management from abusing their authority to infringe upon shareholder interests, thereby increasing shareholder confidence and resolving the Korea Discount.
Financial stocks are gaining attention as the ruling party shows its determination to pass the Commercial Act amendment within the year. This is because financial firms are active in purchasing and cancelling treasury shares to return value to shareholders and enhance corporate value. With the introduction of a bill that limits the cancellation period to one year, interest in financial stocks is growing even further.
Financial stocks, which saw repeated price fluctuations despite the "Value-up Program" implemented by the previous administration, rode an upward trend after the launch of the new government—which set the goal of reaching a "KOSPI 5000"—before recently undergoing a correction. In particular, the share prices of the four major financial holding companies that own banks (KB Financial Group105560, Shinhan Financial Group055550, Hana Financial Group, and Woori Financial Group) showed similar movements, rising nearly two-fold from their lows this year.
KB Financial Group's stock price dropped to as low as 69,300 won on April 9, when global stocks plummeted due to U.S. tariffs, but it subsequently rose to record an intraday high of 140,000 won on November 13. It is currently maintaining the 120,000 won range. For KB Financial Group, there are forecasts that shareholder returns will increase even more in 2026. Kim Do-ha, an analyst at Hanwha Investment & Securities, predicted, "As excess capital and future earnings increase, the amount of shareholder returns in 2026 is expected to reach 3.1 trillion won."
Shinhan Financial Group's stock price bottomed out at 42,500 won on April 9 before trending upward to hit 83,900 won on November 13, subsequently pulling back to the high 70,000 won range. Hana Financial Group recorded an intraday high of 51,500 won on April 9 and is currently in the 90,000 won range. Woori Financial Group fell as low as 15,010 won and is currently maintaining the high 20,000 won range.
The fact that financial firms are expanding the scale of their treasury share repurchases and cancellations every year is another factor boosting expectations for share price growth. Among major financial holdings, some have exceeded 1 trillion won in treasury share repurchases and cancellations decided this year as of November 25. KB Financial Group decided to purchase and cancel a total of 1.48 trillion won in treasury shares, with 520 billion won in February, 300 billion won in April, and 660 billion won in July. Treasury shares worth 500 billion won acquired in March and November of 2024 were also cancelled in May of this year.
Shinhan Financial Group purchased 1.3 trillion won worth of treasury shares this year (500 billion won in February, 800 billion won in July). The treasury shares purchased in February were acquired and cancelled during June. Treasury shares worth 400 billion won disclosed for acquisition in October 2024 were also cancelled in April of this year. Hana Financial Group purchased and cancelled 400 billion won in treasury shares in March and 200 billion won in July. It also purchased 150 billion won in treasury shares last October. In May, it cancelled treasury shares worth 150 billion won that had been purchased in November 2024. Woori Financial Group purchased 150 billion won in treasury shares in February and cancelled them in September.
Some firms began full-scale treasury share repurchases and cancellations this year. iM Financial Group announced in October 2024 that it would "purchase and cancel 150 billion won worth of treasury shares by 2027." Previously, it had not cancelled any treasury shares between 2022 and 2024. In accordance with its plan, iM Financial Group decided to purchase and cancel treasury shares worth 40 billion won and 20 billion won in February and August, respectively. The 40 billion won in treasury shares purchased in February completed the purchase and cancellation process in July.
The fact that a consensus has been reached to lower the maximum tax rate for separate taxation of dividend income is another reason why financial stocks are drawing attention. Separate taxation of dividend income is a system where dividend income earned from investing in listed company stocks is separated from comprehensive income and taxed individually. Currently, financial income exceeding 20 million won is added to comprehensive income and subjected to a progressive tax rate of up to 45%, placing a heavy burden on taxpayers. Financial firms, which have ample capital and stable business cash flows, are considered stocks with high dividend yields.
The government is discussing a tax reform bill to separate dividend income in order to revitalize the stock market and promote corporate dividends. The government's original proposal was to lower the maximum tax rate to 35%, but voices in political circles grew louder that it should be 25%. With news recently emerging that the government also agrees with the plan to ease the maximum tax rate and move the implementation date from 2027 to 2026, there are observations that financial stocks will benefit. Choi Jung-wook, an analyst at Hana Securities, noted, "With the introduction of separate taxation from 2026, dividend yields will rise," adding, "It will be a factor that significantly increases the investment appeal for high-net-worth individuals who are sensitive to taxes."
However, the key is to overcome opposition from civic groups and others who criticize this as a "tax cut for the wealthy." The People's Solidarity for Participatory Democracy issued a statement on the 23rd, pointing out, "It will be difficult to avoid criticism that the only gain from pushing through a separate taxation of dividend income—which is stronger than that of the Yoon Suk-yeol administration—is the short-term stimulation of the stock market," and adding, "If a separate taxation of dividend income is introduced where the maximum tax rate is less than half that of earned income, fiscal crisis will only deepen."