Rapid won-dollar exchange rate fluctuations amplify corporate burden

Exchange rate fluctuations have different impacts depending on economic data, but it is estimated that household burden increases by approximately 6 trillion won. This ultimately results in a consumption decrease of about 6 trillion won. As such, exchange rate fluctuations reduce households' real purchasing power, negatively affecting the domestic economy.

Foreign investors typically flow in when the exchange rate moves in a trend and a strong won trend is established. However, the exchange rate's recent rapid decline makes it difficult to attract foreign investment. In the past, large-scale events such as SK Hynix's 40 trillion won ADR issuance acted as a trigger for foreign investment, but currently, such incentives are lacking.

Therefore, while long-term active fund inflow may be possible, it seems difficult to take an aggressive position. These positional constraints are leading to a demand from foreigners to sell won and secure dollars. Ultimately, foreign investors may no longer find the Korean market attractive.

Recently, the won has shown independent strength, unlike neighboring currencies such as the Japanese yen and the Chinese yuan. There is no clear explanation for this sharp appreciation, which is increasing market confusion. While there are analyses suggesting robust economic growth and the complex interplay of lagging effects for export companies, it is difficult to accurately identify the fundamental cause of the won's unusual strength. This is making exchange rate forecasting difficult for domestic companies and overseas investors alike.

This is because companies did not have time to react to the sudden exchange rate fluctuations. While some large corporations like Samsung Electronics and SK Hynix have some resilience, most small and medium-sized enterprises (SMEs) lack effective ways to withstand the shock of exchange rate changes. Accordingly, a significant slowdown in performance is highly likely from the third quarter.

The FOMC's decision is expected to play a decisive role in resolving market uncertainty as it will include specific guidance on future interest rate directions. If the exchange rate stabilizes at around 1,300 won, companies may be able to adapt to some extent, but if it breaks 1,400 won, it could act as a new normal.

There is an expectation that the exchange rate will stabilize in the 1,300 won range after the Chuseok holiday. From October, as the economy resets for the fourth quarter, corporate earnings estimates are expected to become clearer. Once the exchange rate stabilizes, it will be necessary to review export companies' investment strategies, and market uncertainty may somewhat dissipate.

The September earnings miss for semiconductor stocks like Samsung Electronics and SK Hynix seems to have already been somewhat reflected in the market. While they are currently showing somewhat sluggish movement, a positive outlook is possible if the support levels of 250,000 won and 1,600,000 won are maintained. It is expected that after the exchange rate volatility subsides, they could even gain momentum for a rebound. The market predicts that semiconductor stocks will regain upward momentum after the exchange rate decision.