Foreigners’ net selling of the Korean stock market and the outflow of investment funds from Seohak Ant also affected
(Seoul = Yonhap News) Reporter Shin Kyung-kyung = The reason why the value of the won has recently fallen more severely than other currencies is that the economy relies heavily on foreign raw materials and China, and it is analyzed that foreigners have recently sold Korean stocks.
According to the report ‘Analysis of the recent weakness in the won’ released by the Bank of Korea on the 18th, the won has been weakening (depreciating in value) not only against the US dollar but also against the dollar index and major emerging market currencies since last year.
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Last year, the won/dollar exchange rate rose by 8.2%, exceeding the dollar index (6.3%) and the exchange rate with the US in emerging countries (2.7%). It means that the won did not depreciate just to the extent that the dollar strengthened under the influence of the US Federal Reserve (Fed) tightening, including tapering (reducing asset purchases).
The BOK cited ▲ international raw material prices ▲ dependence on the Chinese economy ▲ portfolio investment as the reasons.
First of all, the BOK explained that the exchange rate reflects concerns that an increase in international raw material prices could have a greater impact on the Korean economy through deterioration of terms of trade and current account due to the nature of the economy, which is highly dependent on foreign raw materials.
Moreover, since the economy is highly dependent on China, it is analyzed that the value of the won has fallen further when the possibility of a slowdown in China’s real economy has been raised since the middle of last year due to the possibility of default (default) of Hengda Group, a Chinese real estate development company.
Korea’s trade dependence with China is 24.6% as of 2020, the average of five Southeast Asian countries (India, Indonesia, Malaysia, the Philippines, and Thailand) (17.2%) or the average of emerging countries (Morgan Stanley Capital International Index) classification (MSCI). 13.3%).
In addition, in the course of portfolio rebalancing (rebalancing), the outflow of investment funds by increasing net selling of Korean stocks, which rose sharply in the second half of 2020, was also cited as a factor in the depreciation of the won. In addition, the outflow of investment funds centered on stocks by Koreans such as ‘Seohak Ant’ is also affecting the won’s depreciation to some extent.
In the report, the BOK said, “As the won exchange rate is affected by several factors, it always monitors trends such as US inflation (inflation), international raw material prices, the Chinese economy, investment movement, and changes in domestic corporate performance due to the semiconductor business cycle. It is necessary to strengthen monitoring of money flows and the foreign exchange market,” he advised.
shk999@yna.co.kr
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2022/01/18 12:00 Send
