An increasingly weaker South Korean won is anticipated to create a polarized stock market, favoring exporters who benefit from a stronger dollar while negatively impacting manufacturers dependent on imported raw materials. Analysts suggest that stocks in key sectors such as semiconductors, automobiles, shipbuilding, and defense are likely to see gains as the won hovers around the psychologically significant level of 1,400 won per dollar. The Korean currency recently closed at a seven-month low of 1,475.6 per dollar.
Focusing on the semiconductor sector, major players like Samsung Electronics and SK hynix, which together represent over one-fourth of the benchmark KOSPI’s market capitalization, are expected to capitalize on this trend. With approximately 80 to 90 percent of their revenue generated from international markets, both companies are well-positioned to enhance their profits, particularly as demand for DRAM and NAND flash memory remains robust through the fourth quarter.
Automakers, specifically Hyundai Motor and its affiliate Kia, are also likely to experience positive currency-driven revenue growth. Research indicates that for every increase of 10 won in the annual average exchange rate, the combined operating profits of these two companies are projected to rise by around 500 billion won, equivalent to approximately $339.67 million, per Hwang Seung-taek of Hana Securities.
In the shipbuilding industry, most payment settlements for vessel orders occur in dollars, which further positions the sector to benefit. Similarly, the defense industry, experiencing a rising share of overseas arms contracts, is also predicted to see positive outcomes. Cosmetics companies leveraging K-content are expanding their global market reach, while entertainment firms like HYBE, which are increasing their concert activities in North America and Europe, are likely to reap considerable benefits from a stronger dollar.
On the other hand, sectors that rely heavily on imported goods are facing a more challenging outlook. Steelmakers, airlines, and energy companies, which depend on raw materials in dollar currency, are expected to encounter increased cost pressures. For instance, POSCO and other steel producers are anticipated to endure higher expenses as they import raw materials priced in dollars.
The airline sector, deemed particularly susceptible to fluctuations in currency value, might see its profitability diminish. The majority of airline revenue comes in won, yet over half of their costs—jet fuel, a major expenditure—are dollar-denominated. This currency dynamic raises concerns about the financial stability of these companies.
State-run energy enterprises that provide electricity and gas are also forecasted to be severely impacted by high foreign currency debt levels, facing a direct hit from the weakening won.
Domestic demand-driven sectors, including travel and retail, may suffer as rising import prices erode consumer sentiment and weaken demand. However, companies in the refining and petrochemical sectors might experience short-term benefits from increased inventory valuation owing to higher exchange rates.
While analysts predict potential gains for several industries, they advise caution. If the trend of a strong dollar persists, escalating import costs could erode overall profitability, underscoring the importance of strategic risk management for businesses navigating these economic conditions.
