Export-reliant tire firms, biotechs to gain from stronger dollar amid political turmoil

A dealer at Hana Bank works at the lender's dealing room in Seoul, Thursday. Yonhap

Korea’s tire firms and biotech players benefit from the strengthening dollar triggered by the ongoing political turmoil of President Yoon Suk Yeol’s declaration of martial law and subsequent lifting, analysts and industry officials said Thursday.

The Korean economy is heavily reliant on exports, so revenues from most manufacturing firms — such as Nexen Tire and Hankook Tire — are affected by the won-dollar exchange rate. This is a similar case for biotech firms whose profitability goes up and down by the value of the dollar.

According to data from the Bank of Korea, the won-dollar exchange rate closed at 1,415.1 won per dollar, up 0.11 percent from a day earlier. The figure is close to this year’s high of 1,446.5 won per dollar on Wednesday.

The soaring exchange rate comes as a boon for the aforementioned companies, as the weakening value of the local currency generates more returns for them.

In the wake of the martial law fiasco, the benchmark KOSPI has been faltering, with losers far outpacing winners, but Hankook Tire, Nexen Tire and Samsung Biologics are showing steady movements, prompting analysts to paint a rosy picture for the two industrial sectors and carmakers.

“Tire firms and automakers share a similar export-driven profit structure, so a stronger dollar will be able to help them improve their earnings results in the fourth quarter,” Yoo Ji-woong, an analyst at Daol Investment, said.

Container boxes are stacked at a port in the nation's southern port city of Busan, Nov. 29. Yonhap

Samsung Biologics also recently revised its 2024 annual sales projection to 4.32 trillion won ($3.05 billion) from 4.15 trillion won on the favorable exchange rate.

“The biotech firm already generated decent third-quarter earnings on the prolonged high exchange rate, so the firm’s annual operating profit will continue its upward trajectory until the end of this year,” Kim Min-jung, an analyst at DS Investment & Securities, said.

Carmakers will also be able to enjoy their earnings growth throughout the end of 2024, as most homegrown carmakers, such as Hyundai Motor and Kia, report double-digit sales growth in the U.S.

According to the carmakers, they attained combined auto sales of 154,118 in the world’s largest economy in November, up 14.7 percent from a year earlier. This is double-digit growth for two consecutive months there.

Data from Daol Investment shows that the two carmakers’ combined annual operating profit rises by 200 billion won when the won-dollar exchange rate also rises by 10 won per dollar.

But industry officials said the strengthening dollar also comes as a bane to the export-reliant companies, as they import raw materials and spend most costs for transportation to other countries.

“Even if the won-dollar exchange rate is widely forecast to remain at a high level throughout the year, their profitability will also be hit by the two factors from a long-term viewpoint,” an official from a manufacturing firm said.