‘AI National Dividend’ Triggers 5 Trillion Won in Foreign Selling
KOSPI tumbles before hitting 8,000 on May 21, but ‘AI National Dividend’ proposal triggers 5.43 trillion won in foreign selling
The domestic stock market plunged sharply just before a first-ever break above 8,000 on the KOSPI. Foreign media reported that a proposal by Kim Yong-beom, presidential chief of policy, for an “artificial intelligence (AI) national dividend” had an impact. With foreign and retail investor flows now diverging sharply, the market is expected to see heightened volatility for the time being.
Bloomberg reported on May 12, “South Korea’s stock market was rattled after a senior policy official argued that tax revenue generated from the AI industry should be used to pay dividends to the public.”
In a Facebook post that day, Kim said, “The fruits of the AI infrastructure era are not the result of specific companies alone,” adding, “If a strategic position in the AI supply chain leads to excess tax revenue, how to use that money is not a matter of choice but an issue that naturally requires consideration.”
He also said, “These fruits came from a foundation built together by the entire public over half a century,” and added, “Part of those fruits should be returned structurally to the people.”
The KOSPI in fact swung sharply that day. After widening its gains at the open, the KOSPI rose as high as 7999.67, but after Kim’s proposal became known it plunged 5.12% and fell to the 7400 range. It recovered before the close and finished trading at 7643.15, down 2.29% from the previous session.
Foreign investors were net sellers of 5.43 trillion won ($3.69 billion) on the KOSPI market that day, while institutions also sold 798.9 billion won. Retail investors were net buyers of 6.09 trillion won, but failed to stop the index from falling.
Bloomberg said, “Kim’s post triggered extreme volatility in South Korea’s stock market. That is because confusion grew as investors tried to interpret what the proposal would actually mean in policy terms,” adding, “Kim’s remarks show that pressure is growing to socially redistribute profits at a time when semiconductor companies such as Samsung Electronics and SK hynix have enjoyed enormous gains from the AI supercycle.”
As market volatility increased, Kim moved to explain himself, saying, “It is not intended to impose a new windfall tax on corporate profits.”
The securities industry expects KOSPI volatility to expand for the time being. Recently, foreign and retail investors have been moving in clearly opposite directions.
According to the financial investment industry, in the KOSPI electrical and electronics sector, which includes Samsung Electronics and SK hynix, foreign investors and institutions posted net selling of 6.1535 trillion won and 1.0103 trillion won, respectively, that day. Retail investors posted net buying of 7.1664 trillion won.
The market also appears to have come under pressure from foreign media reports that U.S. President Donald Trump held a meeting with his national security team and discussed the possibility of resuming military operations against Iran. Retail investors, however, viewed it as a chance to buy on weakness.
There is also an assessment that there was no problem in terms of fundamentals such as earnings and valuations, but that stock prices had risen too sharply in a short period and were suddenly corrected as “FOMO” (the fear of being left behind while others make money) intensified.
Han Ji-young, an analyst at Kiwoom Securities, said, “Money continues to flow into the market, foreign securities firms are also presenting a KOSPI 10,000 view, and upward revisions to earnings estimates for domestic companies are continuing. The outlook that the index still has upside has not been undermined,” adding, “It seems necessary for the time being to be mindful that the trade-off and aftereffects from concentration in a small number of sectors, such as semiconductors, can create temporary volatility like today.”
Yoon Young-sil
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