Dollar sales by export companies, led by Samsung Electronics and Hynix, drove the won's strength. However, factors such as the resumption of investment in the U.S., corporate dollar repurchases, and increased overseas assets by retail investors in foreign stocks also remain, making the future direction of the exchange rate uncertain.
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CEO Kim Jun-song stated that the exchange rate, which was around 1,560 won as of July 1, recently fell to 1,380 won, a sharp drop of 180 won in approximately 50 days.
This is a very significant change in a short period and has had a considerable impact on the domestic foreign exchange market.
Over the past year, despite sufficient dollar supply due to trade surpluses from Samsung Electronics and Hynix, the dollar's strength persisted.
This is analyzed as being due to market expectations that future dollar demand would exceed current supply.
The government continuously intervened in the foreign exchange market, and when the intervention's effect was minimal, it pressured the National Pension Service (NPS) to increase its currency hedging ratio.
The NPS was mobilized to defend the exchange rate, continuously intervening in the foreign exchange market at exchange rates of 1,460 won and above 1,500 won.
The government pressured Samsung Electronics and Hynix to sell their held dollars.
This was done under the pretext of securing funds for investment in domestic semiconductor factories, and these two companies hold the largest amount of dollars domestically.
Around the same time, Hynix issued ADRs through a rights offering overseas and sold the proceeds at a rate of 1 billion dollars per day for 30 days.
This significantly contributed to the decline in the exchange rate by increasing the dollar supply in the foreign exchange market, and it appears that Samsung Electronics and Hynix indeed sold a substantial amount of dollars.
In early July, the heads of the Customs Service and the National Tax Service strongly stated that they would conduct customs and tax investigations on export companies holding dollars overseas.
CEO Kim Jun-song assessed this announcement as the decisive moment that led export companies to resolve uncertainties and participate in dollar sales.
CEO Kim Jun-song analyzed that the government's direct pressure on companies, unlike in the past when it only pressured the National Pension Service, played a decisive role in the exchange rate decline.
At the exchange rate of 1560 won, the government and the Bank of Korea's pressure on companies was effective, accelerating the won's strength through export companies' dollar selling.
CEO Kim Jun-song evaluated Samsung Electronics and Hynix's move towards strengthening shareholder returns as positive, aligning with the commercial law revision and shareholder return trends discussed for a year.
However, he took a cautious stance on the assessment that it did not meet market expectations.
CEO Kim Jun-song explained that even with the same expected return, there is a preference for stocks with lower volatility, pointing out that the high volatility of the domestic stock market causes fatigue for global investors and leads to their avoidance.
He added that the volatility of large domestic stocks is much greater compared to Nasdaq, leading investors to prefer stable assets.
This volatility issue can also affect domestic companies' shareholder return policies, making it difficult to attract investment.
The perspective was raised that if Samsung Electronics converts dollars earned overseas into won for dividends, it could be a factor for won strength.
However, significant capital expenditure burdens, such as U.S. investments, still exist, making it difficult to definitively conclude it as an unconditional factor for won strength.
CEO Kim Jun-song raised concerns that Samsung Electronics' combined investment plans in the U.S. and Korea, along with its shareholder return plans, might exceed its current cash flow.
This ultimately means that some of the investment or dividends might not be realized.
Samsung Electronics announced its decision to acquire 53.28 million common shares, totaling 14.9 trillion won, in treasury stock. This is for employee stock compensation and open market purchases.
CEO Kim Jun-song analyzed that the government has recently been intervening in the market more frequently, indicating a strong desire to show the exchange rate decline as a policy achievement.
Accordingly, the government is expected to actively pursue policies to further lower the exchange rate.
Export companies are selling dollars as soon as they come in, and Samsung Electronics and Hynix are also focusing their cash flow on dollar sales.
The shipbuilding industry is also under pressure to sell contract volumes through forward foreign exchange, so corporate dollar sales are expected to continue in line with government intentions.
U.S. investments, which had been postponed due to exchange rate volatility, are now at a point where they can be executed.
With increased pressure from the U.S. government to invest, the current lower exchange rate could be an opportune time for investment execution.
Large corporations that have sold dollars will need to repurchase them in the future to fulfill their promises of investment in the U.S.
This dollar demand for fulfilling overseas investment commitments could act as a factor for exchange rate appreciation.
The sentiment of individual investors to shift to stable U.S. stocks due to fatigue from the high volatility of the domestic stock market is expected to continue.
CEO Kim Jun-song pointed out that the proportion of overseas assets held by Korean individual investors is still lower compared to wealthy Asian countries like Japan and Hong Kong, suggesting the possibility of further overseas asset outflows in the future.
The movement of individual investors to shift to the U.S. market could intensify once they recover their principal in domestic stocks.
While current exports are significantly high, both future concerns and changes in export trends must be closely watched.
CEO Kim Jun-song emphasized the need to closely monitor how exchange rate decline and appreciation factors will unfold alongside future news.
With the government's strong will to lower the exchange rate and strong corporate dollar selling, it is difficult to predict the bottom of the current exchange rate.
Therefore, it is crucial to balance the analysis of the current export boom with potential future concerns.
Answers come from the transcript, with the exact spot cited.
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