The South Korean benchmark Kospi index’s eight month-long rally is finally faltering this month, as the North Korea crisis, proposed tax hikes from President Moon, as well as weak manufacturing numbers have combined sour investor sentiment.
The won has lost 1.1% against the dollar since it reached a nine-month high in July, while the Kospi 200 volatilty index is up 27% since a recent low in late July.
Bloomberg reports Tuesday on the cocktail driving the downturn:
- North Korea condemned the latest round of United Nations sanctions Monday and vowed it will make the U.S. “pay dearly”, according to the Korean Central News Agency.
- South Korean President Moon Jae-in’s administration unveiled proposed tax hikes Aug. 2 on large corporations and high earners as his reform push gets into gear. The Kospi tumbled as much as 2.2 percent, the most since November 2016.
- South Korean prosecutor Park Young-soo has demanded a 12-year prison sentence for Samsung Group’s Jay Y. Lee for his alleged role in a bribery scandal that also toppled former president Park Geun-hye.
- South Korea’s manufacturing purchasing managers’ index returned to contraction in July, according to an Aug. 1 reading, after expanding for the first time this year in June.