The Hidden Meaning Behind Samsung Electronics' New Low Amid the "Terrifying King Dollar"... "Always Be Conservative"

[Asia Economy Reporter Lee Seon-ae] As the shock of the U.S. Federal Reserve's (Fed) interest rate hikes caused the exchange rate to surpass 1,400 won per dollar and South Korea's financial market to convulse, securities firms are increasingly advising to "adopt the most conservative investment stance until the end of the year." Considering the possibility of further stock market declines due to a prolonged trend of rising rates and high-intensity tightening, they recommend stepping back and 'watching' rather than seeking beneficiary sectors.

On the 23rd, major domestic securities firms' research centers predicted further declines in the KOSPI. Except for the most conservative view from Daishin Securities (2050), most set the bottom around 2200 (Samsung Securities, KB Securities, etc.). Those not specifying a bottom said it was because "predicting the lower bound is meaningless," but they still expected further declines below 2300.

This bottom forecast is based on expectations that prolonged high-intensity tightening and a strong dollar will further pressure the domestic stock market. Lee Jae-seon, a researcher at Hyundai Motor Securities, said, "The strong dollar and upward pressure on interest rates are likely to continue until the Federal Open Market Committee (FOMC) meeting in November," suggesting a KOSPI support range of 2210 to 2290.

Typically, a strong dollar fuels risk-averse sentiment. Especially when a strong dollar becomes a trend, it prompts foreign investors to exit the domestic financial market. The won-dollar exchange rate exceeding 1,400 won the previous day was the first time in 13 years and 6 months since March 31, 2009 (the high then was 1,422.0 won) during the global financial crisis. On that day, the exchange rate started trading at 1,405.0 won. According to Mirae Asset Securities, the correlation between the exchange rate and the KOSPI has shown a very high inverse correlation of -0.92 since last year.

There are even voices saying the stock market should brace for shocks at exchange rates of 1,450 won and even 1,500 won. Ahn Young-jin, a researcher at SK Securities, said, "There is a growing need to reset the 1,450 won level as the first resistance line for the won-dollar exchange rate," adding, "There is no material to weaken the strong dollar, so the strong dollar environment is expected to only reverse by the end of this year or early next year." Moon Hong-chul, a researcher at DB Financial Investment, also noted, "Following the U.S. economy, China and Europe are worsening further," and said, "If South Korea's trade and exports deteriorate due to a global economic recession, the exchange rate could rise to levels difficult to predict, so surpassing 1,450 won and going even higher cannot be ruled out."

According to the Federation of Korean Industries, heads of 15 domestic research centers expect the exchange rate to reach 1,422.7 won by the end of the year and possibly rise as high as 1,480 won. They had been busy identifying beneficiary sectors from the rising exchange rate but now unanimously agree that "more weight should be placed on watching." They judge that the exchange rate is rising in a trend, and the resulting cost burden will offset export growth. A researcher at a securities firm said, "The recent plunge of Samsung Electronics to a new low means that when the exchange rate rises in a trend, even export companies suffer," adding, "For export companies' stock prices to improve, the trend of rising exchange rates must stop; thus, looking for beneficiary sectors from exchange rate increases when the rate is expected to keep rising is not very meaningful."

However, the beneficiary sectors from exchange rate increases advised by the securities industry tend to gain stock price recovery momentum once the exchange rate rise halts and volatility stabilizes. The sectors commonly cited by research center heads as beneficiaries of exchange rate increases are automobiles and secondary batteries. Automobiles benefit from increased shipments due to the easing of semiconductor supply shortages and price competitiveness from won depreciation. Secondary batteries are expected to see continuous export growth supported by global electric vehicle demand and policy support.

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