Tax Plan Brings Korea Stock Rally to Abrupt Halt in Risk for Lee

South Korea’s plan to raise taxes on investors and companies abruptly halted one of the world’s hottest equity rallies and raised the risk of sparking discontent with President Lee Jae Myung’s two-month-old administration.

The equity benchmark Kospi led losses in Asia on Friday, closing down 3.9% — its steepest decline since April. Still, it’s one of the top 10 among indexes covered by Bloomberg this year, up 30%. Friday’s losses were led by companies including chipmaker SK Hynix Inc. and Samsung Electronics Co.

The tax proposal marks one Lee’s first major domestic policy initiatives since taking office in June following ...