This article first appeared on GuruFocus.
SK Hynix (HXSCL), a South Korean chipmaker, has helped drive a strong rebound in the won after raising $26.5 billion through its record U.S. listing and converting part of the proceeds into the Korean currency. The company’s dollar sales appear to have demonstrated how a major exporter’s foreign-exchange activity can influence the broader market, giving South Korean authorities fresh momentum in their campaign to encourage companies to bring overseas funds home. At a meeting last week, Vice Finance Minister Huh Chang urged exporters to repatriate more of their foreign-currency proceeds and convert a larger share into won, allowing policymakers to support the currency through corporate flows rather than relying only on costly direct intervention.
Stephen Lee, an economist at Meritz Securities, a Seoul-based securities firm, said SK Hynix’s transactions have developed into a wider wave of corporate dollar selling as the won’s sustained strength encourages other exporters to convert earnings they had previously kept in foreign currencies. Hanwha Ocean, a South Korean shipbuilder, sold about $2 billion of dollar forwards in early July and indicated that additional sales may follow. Bank of Korea data showed that net forward dollar sales by Korean exporters and importers reached an 18-year high of $17.4 billion during the second quarter, suggesting corporate hedging and currency conversions are becoming an increasingly important source of won demand.
South Korean authorities have also called on Samsung Electronics (SSNLF), Hyundai Motor, HD Korea Shipbuilding & Offshore Engineering, and Samsung Heavy Industries, four major Korean companies, to repatriate overseas funds and increase their foreign-exchange hedging. After trading near its weakest level since 2009, the won has gained about 6% against the dollar in July, making it Asia’s second-best-performing currency for the month despite foreign investors selling approximately 13.6 trillion won, or $9.3 billion, of Kospi-listed shares amid concerns over the durability of the artificial-intelligence spending boom. Deputy Finance Minister Moon Jisung expects corporate forward sales to expand further in the third quarter and views SK Hynix’s listing proceeds and similar transactions as the beginning of a broader change in currency supply and demand, although continued stock-market volatility and South Korea’s $350 billion U.S. investment pledge may still create pressure for the won.