Korea Won Gains Most in Week; Funds May Increase Stock Buying

By Kim Kyoungwha

Dec. 8 (Bloomberg) -- South Korea’s won rose the most in a week on speculation that foreign investors may increase purchases of shares after the Kospi index rallied.

The currency is Asia’s best performer today among the 10 most-traded regional currencies outside Japan, after ruling and opposition parties agreed to reduce income and corporate taxes to spur economic growth. The economy grew 0.5 percent last quarter, the weakest pace since 2004.

“Demand for dollars became less intense after selling pressure from foreign investors eased and import settlements are also dwindling,” said Kim Sung Soon, a currency dealer with state-run Industrial Bank of Korea in Seoul. “The atmosphere is turning a bit favorable for the won.”

The won rose 0.5 percent to 1,468.45 per dollar as of 9:16 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency shed 36 percent this year.

The Kospi index rose 1.9 percent, extending gains into a second day as global funds turned to net buyers of stocks, after four days of selling more than they bought.

Income taxes will be lowered by a total of 2 percentage points gradually from next year through 2010, the Ministry of Strategy and Finance said in an e-mailed statement on Dec. 5.

Corporate tax on companies that earn net income of less than 200 million won ($135,208) will be reduced to 10 percent by 2010 from the current 13 percent, according to the government’s proposal announced on Sept. 1. The tax on larger companies with net income exceeding 200 million won will be cut to 20 percent by 2010 from 25 percent now, the proposal showed.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.