▲ US Dollar
As the value of the South Korean won against the US dollar drops into the 1,350-won range and expectations grow that it is entering a prolonged downward trend, sectors sensitive to exchange rate fluctuations are experiencing contrasting fortunes in the domestic stock market.
Airlines, which have a high proportion of won-denominated settlements, are widely expected to benefit, while shipping companies, which collect freight rates in dollars, are concerned that their revenue will decline.
According to foreign exchange authorities and other sources today (September 26), the won-dollar exchange rate stood at 1,358.4 won as of the afternoon of September 23, down about 13% from its peak of 1,561 won on June 5.
The market expects the won to maintain a relatively strong trend through the end of the year, supported by gains in domestic semiconductor stocks and downward trends in international oil prices and US Treasury yields.
In light of this outlook, aviation is the sector most frequently cited by experts as a beneficiary.
In particular, for low-cost carriers (LCCs), a significant portion of their revenue is in won, while expenses such as jet fuel and maintenance costs are paid in US dollars.
The sector is so sensitive to exchange rates that some pointed to the strong dollar as one of the factors behind airlines’ poor performance in the second quarter.
Kim Young-ho, an analyst at Samsung Securities, projected that the strengthening won would be encouraging for airline stocks, stating, “According to the exchange rate sensitivities disclosed by each company, a nearly 9% drop in the exchange rate improves the net income of Korean Air, Jin Air, Jeju Air, and Trinity Airlines by approximately 750 billion won, 34 billion won, 78 billion won, and 40 billion won, respectively.”
Looking at weekly returns for this week (September 21–23), the share prices of major airlines all trended upward, including Korean Air (7.51%), Asiana Airlines (8.15%), Jin Air (4.50%), and Jeju Air (3.91%).
On the other hand, shipping companies operate in domestic and international transport just like airlines, but their situation is different.
Because the US dollar is their functional currency and all revenues are recorded in dollars, a strong won reduces revenue and operating profit when converted.
For this reason, a strong dollar is conversely cited as a factor that boosts the short-term profitability of shipping stocks.
However, some experts suggest that recent high freight rates will likely increase revenues and profits, partially offsetting these negative factors.
Ahn Do-hyun, an analyst at Hana Securities, analyzed, “Considering that overall shipping freight rates remain at high levels following the war, we need to view the current exchange rate situation with an eye toward opportunity rather than concern. The peak season effect for the third quarter is also appearing, driven by strong freight rates on North American routes. It is a structure where market conditions can overshadow concerns related to exchange rates.”
Food and beverage is another sector that is neither crying nor smiling over the falling exchange rate.
While food companies can enjoy lower import prices as the exchange rate drops—given that their reliance on imported raw materials ranges from a baseline of 50% up to 80% to 90%—those seeking to expand into overseas markets may need to raise export prices, potentially undercutting their competitiveness.
Regarding this, Choi Go-woon, an analyst at Korea Investment & Securities, advised, “Food and beverages are surface-level beneficiaries of a falling exchange rate, but selecting individual stocks requires careful thought. We recommend focusing on small- and mid-sized stocks with limited overseas exposure, such as Binggrae and Daesang.”
(Photo: AP, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.
