Won's value loses 10% amid global trade woes
By Park Hyong-ki
Foreign investors continued to be net-sellers of local shares and currency amid increasing uncertainties both at home and abroad.
 |
They sold shares worth some 200 billion won ($180 million) Friday, pushing the benchmark KOSPI down 11.89 points, or 0.58 percent, to close at 2,055.80.
The Korean won lost 4.2 won to finish at 1,195.7 won per U.S. dollar. The won has weakened by more than 10 percent from a year ago, according to the Bank of Korea.
Analysts say the stock and currency markets will continue to face volatility in the short term, given the ongoing trade war between the United States and China.
The trade conflict has escalated into a technology war between the two economic powerhouses, with President Donald Trump declaring a national emergency and targeting Chinese tech giants and startups, including Huawei, they noted.
Trump said those Chinese companies pose a threat to U.S. national security.
Caught in the crossfire, the Korean economy is further beset by a weakening growth outlook.
"We can't expect the trade conflict will be resolved anytime soon. We can only hope they can reach a compromise in phases," said Kim Man-gi, a professor of Chinese business at Sookmyung Women's University.
"But I am more concerned about the future prospects of our economy, given that this country does not have any new industries to take it toward the next level. And most of our existing tech industries such as displays and even semiconductors are losing ground."
Kim noted the recent economic outlook by the state-run Korea Development Institute, which forecast the country to grow 1 percent in 2020.
Also, the trade war, which has extended into a tech war, is really a "power game" between the two countries trying to command and conquer the new digital world, he said.
Chinese tech companies and unicorns have become leaders in drones, voice recognition, and are becoming strong players in artificial intelligence and semiconductors.
Moon Hong-cheol, an analyst at DB Financial Investment, said two short-term factors will weaken stocks and the value of the won.
These are low confidence and trust in the economy, and the trade dispute.
However, he said he has a slightly different scenario in which the U.S. dollar could weaken against the Korean currency.
"The U.S. Federal Reserve has signaled an accommodative policy. Also, the U.S. government is expected to reinvest the taxes it collected in April," Moon said.
"To this end, I forecast the value of the won will strengthen against the U.S. dollar in the latter half ― a view different from others that project the exchange rate could reach 1,300 won in the near future."
