Investment Strategies in the Era of 1300 Won Exchange Rate

[Asia Economy Reporter Hwang Junho] Following the shooting incident involving former Japanese Prime Minister Shinzo Abe, the KRW-USD exchange rate has risen back to 1,300 won. Amid a decline in risk asset preference, expectations are growing that the prolonged weakness of the Korean won will continue. Historically, when the won weakens, foreign investment increases, suggesting that it is a time to pay attention to overseas investments.

Kim Su-yeon, a stock strategy researcher at Hanwha Investment & Securities, stated in a strategy report titled "Investment in the Era of 1,300 Won Exchange Rate" that "by the end of this month, the benchmark interest rates of Korea and the United States are expected to invert."

She added, "When interest rates invert, investors worry about exchange rate increases and the withdrawal of foreign investors," noting that "recently, the KRW-USD exchange rate reached 1,300 won, and foreign investors are selling off the Korean market."

However, in the past, when interest rates inverted, there was no outflow of foreign capital. On the contrary, Korea's foreign investment increased rapidly. The higher U.S. interest rates compared to Korea were understood to have led to increased overseas investments due to differences in economic momentum. In particular, during the period from March 2018 to February 2020, when the Korea-U.S. benchmark interest rates were inverted, overseas direct investment assets increased by 26%, stocks by 39%, and bonds by 33% in international investments.

Researcher Kim said, "In this cycle as well, increasing the proportion of overseas investments is the best 'hedge,'" and analyzed, "Although there may be concerns about the exchange rate, the possibility of the won turning strong in the short term is limited."

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