S. Korean automakers rise despite stronger Korean currency

Shares of Hyundai Motor Co. and Kia Motors Corp. are rising despite the rising trend in the value of the Korean won versus the dollar, which usually works against the country’s exporters, including automakers.

Hyundai Motor, the country’s largest automaker, finished 2.2% higher at 185,000 won on Sept. 21. The stock has risen 7.9% in the past week amid the won's steady gains in the currency market. Its sister firm, Kia Motors, closed up 1.4% at 48,450 won.

Their stellar performance in the stock market has pushed the combined market capitalization of Hyundai Motor Group’s 12 affiliates, including Hyundai Mobis Co., above a key threshold of 100 trillion won ($86 billion) for the first time in more than two years.



Traditionally, a stronger won has weakened Korean exporters’ price competitiveness in overseas markets, often pressuring their share prices. Meanwhile, gains in the local currency versus the dollar are a tail wind for importers, such as oil refiners and airlines, which pay for jet fuel imports in dollars.

Analysts say the weakened link between the movements of the foreign exchange rate and share prices is  due to Korean automakers’ growth potential and their competitive edge.

Stocks of Hyundai Motor Group affiliates have risen significantly, powered by expectations on its electric-vehicle lineup that will be rolling out in full force from next year. Hyundai Motor is the world’s top hydrogen carmaker and fifth largest in the pure electric car segment, according to a market report.

“Investors are buying into Korean exporters amid signs of rebounding overseas shipments in the coronavirus era. A stronger won is usually a minus for exporters, but their growth potential is an overriding factor,” said Lim Eun-young, an analyst at Samsung Securities.



WON AT EIGHT-MONTH HIGH, TO RISE FURTHER

On Monday, the Korean won rose to its highest level in eight months against the greenback in line with the recent trend of firmer emerging market currencies, including the Chinese yuan.

The Korean currency closed up 2.3 won at 1,158 won per dollar in Seoul trade on Monday -- the highest since 1,157 won on Jan. 15.

The Korean won is expected to continue its upward run through the Nov. 3 US presidential election, with the Federal Reserve’s commitment to ultra-low interest rates likely to boost investors’ risk appetite, analysts said.

“Foreign fund flows into the Korean stock market will likely continue for some time, alongside the weakening dollar versus emerging-market currencies, including the won,” said Lee Kyung-min, a market analyst at Daishin Securities.

Write to Jae-Won Park at wonderful@hankyung.com