Retail Investors Sold Off 1.8 Trillion Won Ahead of Ex-Dividend Date

Major Shareholders Flood Market to Avoid Capital Gains Tax and Comprehensive Financial Income Tax
Celltrion Tops Net Selling Despite Positive News, Stock Price Weakens

On the 29th, when the KOSPI started weak, employees were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. On that day, the KOSPI index opened at 2,810.55, up 1.95 points (0.07%) from the previous day, and the KOSDAQ index opened at 928.58, up 1.58 points (0.17%) from the previous day. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Minwoo Lee] Individual investors dumped stocks worth 1.8 trillion won on this year's dividend record date. This is interpreted as a move to avoid capital gains tax by being classified as major shareholders.

According to the Korea Exchange on the 29th, individual investors sold a net total of 946 billion won worth of stocks in the KOSPI market the previous day. This is the largest scale since net selling of 1.1907 trillion won on the 11th of last month. Over the past three trading days, including 385.9 billion won on the 23rd and 803.1 billion won on the 24th, a total of 2.135 trillion won worth of stocks were net sold. After purchasing a massive 2.2206 trillion won on the 30th of last month, they had been steadily buying, but recently began rapidly selling off stocks.

Individual investors also net sold 902.7 billion won in the KOSDAQ market the previous day, marking the largest scale ever. Having steadily bought stocks in the KOSDAQ market this month, individual investors showed consecutive net selling over three trading days starting from the 23rd. The total net selling by individual investors in the two major markets the previous day amounted to 1.8332 trillion won, ranking second all-time following 1.9713 trillion won on the 5th of last month.

The most sold stock was Celltrion. It was net sold by 361.8 billion won the previous day. This is the largest net selling by individual investors in a single trading day since 2017. Amid this selling pressure, Celltrion’s stock price closed down 4.03% at 333,500 won. Despite combined buying by foreigners and institutions amounting to 212.5 billion won and 153.9 billion won respectively, and positive news about the imminent approval application for a COVID-19 antibody treatment, the stock price could not be supported. Additionally, individual investors heavily sold stocks such as Celltrion Healthcare (171.6 billion won), Hyundai Motor (93.4 billion won), Shinpung Pharmaceutical (69.1 billion won), and Alteogen (66.5 billion won).

This selling spree is interpreted as individual investors classified as "big players" dumping stocks to avoid the major shareholder capital gains tax imposition requirements. Individual investors holding more than 1 billion won in a single stock as of the previous day must pay capital gains tax if they sell stocks next year and realize profits. It is also observed that many are trying to avoid comprehensive financial income taxation. When the total annual interest and dividend income exceeds 20 million won, financial income is combined with other comprehensive income such as business income and taxed at the comprehensive income tax rate (progressive tax rate). A financial investment industry official explained, "There are quite a few people who are reluctant to file taxes with the tax office, and there are also quite a few wealthy individuals," adding, "This large volume of individual investor selling caused an unprecedented net selling trend in the market."

Meanwhile, despite the record-breaking selling spree and ex-dividend date causing the market to open lower that day, most of the losses were recovered early in the session. The KOSPI, which opened at 2799.11, down 0.34% from the previous day, recorded 2814.70 by 10 a.m., regaining the 2800 level. The KOSDAQ opened at 928.58, up 0.17% from the previous day, and rose to 944.14 by 10 a.m.

This content was produced with the assistance of AI translation services.