Has the Dollar Peaked? "Expecting a Favorable Wind for Samsung Electronics"

[Asia Economy Reporter Ji Yeon-jin] As the U.S. Federal Reserve (Fed) and the Bank of England tighten monetary policy in response to inflation, there is speculation that the value of the dollar may have recently peaked. The dollar index, which reflects the Fed's possibility of three interest rate hikes next year, is at its highest level, but it is expected that the dollar's value will decline if liquidity in China increases.

According to Hana Financial Investment on the 20th, the Fed raised interest rates three times in 2017 and four times in 2018. The Fed is expected to raise rates three times next year, which the market interprets as the Fed’s most hawkish stance recently.

The current dollar index stands at 96.7 points, the highest level since the second half of 2020. However, since this level already reflects the possibility of three rate hikes next year, further increases are expected to be difficult. In fact, speculative long positions on the dollar index in the U.S. futures market have decreased somewhat, from 87% last month to 79% currently.

Additionally, unlike advanced countries, China is pursuing an accommodative monetary policy, which is another factor predicting a weaker dollar. As sharply rising prices have stabilized, China chose to lower the reserve requirement ratio to boost domestic consumption. Consequently, the growth rate of China’s total social financing and the share of private credit in GDP have turned upward after five months. Generally, when liquidity in China’s market increases, the dollar index falls, and when liquidity decreases, the dollar index rises.

Lee Jae-man, a researcher at Hana Financial Investment, said, "We believe the dollar value (dollar index) is entering a phase where it is highly likely to have passed its peak." He added, "If the dollar index turns downward, funds will flow into emerging market equity ETFs, and the foreign ownership ratio in the domestic stock market will begin to rise. The ratio of short-selling value to KOSPI trading value is also likely to decline, which is expected to improve foreigner-centered supply and demand."

Because of this, there is speculation that foreign funds may flow back into Samsung Electronics, whose foreign ownership ratio has significantly decreased this year. Currently, Samsung Electronics’ foreign ownership ratio stands at 51.8%, down 3.9 percentage points compared to the same month last year, marking the largest decline since 2010.

Lee also advised paying attention to stocks among the 110 companies included in the 'MSCI KOREA' index that have historically seen strong foreign net buying intensity (monthly foreign net buying amount/market capitalization) when the dollar index falls, currently have a higher-than-average short-selling ratio relative to trading volume, and have experienced a decline in foreign ownership ratio this year.

This content was produced with the assistance of AI translation services.