After a successive setback in the South Korean stock market, the Korean Won fell to a low level since the 2008 financial crisis. Marketers argued that the withdrawal of foreign investment from Korean equities and the return of United States dollar assets had been a direct cause of recent exchange-rate pressures, while AI valuation disputes and the expected slowdown in the chip industry further magnified the sale.
Two months of drops.
Coimpaper quoted Bull Theory as saying that the Korean dollar has fallen by 7.5 per cent against the United States dollar over the past two months. The KRW/USD exchange rate given in the text dropped to 0.000632, which was close to the peak of the crisis in 2008, with the latest hovering around 0.000638.
When foreign capital sells Korean equities, it is usually exchanged in United States dollars or in local currency, which directly pushes up the dollar demand and lowers the Korean dollar exchange rate. Since the Korean Won is not the main reserve currency, exchange rate fluctuations tend to be more pronounced when funds are concentrated abroad.
The Korean stock market triggers the stop.
While the Korean Won is weak, the Korean stock market has also collapsed. It was reported that on June 23, the Korea Consolidated Stock Price Index (KOSPI) fell by 9.99 per cent a day, triggering the stop, and that both SK Hercules and Samsung electronics fell by more than 11 per cent.
The sale continued to expand. On June 26, KOSPI again fell over 8%, the fifth trigger to stop in a month. According to the reported data, the market value of the Korean stock market evaporated over 40 trillion won, or about $36 billion.
- June 23rd: KOSPI fell 9.9%
- June 26: KOSPI fell over 8%
- Within a single month: the market triggers the cut-off five times
AI chip expected to lose focus
The report links this round of fluctuations to the AI block valuation retreat. The rise in the Korean market over the past period has been heavily dependent on the expected demand for AI chips, especially for the storage of chips and the performance of large technology units. As investors begin to reassess the relevant valuations, the withdrawal of funds accelerates.
Another pressure mentioned came from financing transactions. According to the report, the balance of Korean financing vouchers has risen to 32.67 trillion won, or approximately $22.4 billion, an increase of 25 per cent over the same period. At a time when stock prices are falling rapidly, high-leverage positions can be scaled up to sell, further slowing stock markets and exchange rates.
According to the article, the subsequent movement of the Korean Won still depends on the stability of the demand for the AI chip. If foreign investment continues to flow out of the Korean market, the downward pressure on the Korean Won may be difficult to mitigate quickly.