The won's exchange rate against the U.S. dollar has exceeded its highest level since the global financial crisis in 2009, leading to mixed outcomes across industries. While the stock prices of industries that receive payments in dollars, such as shipbuilding, are showing strength, airline stocks are declining amid concerns that overseas travel may decrease.
According to the Korea Exchange on the 19th, stock prices in the shipbuilding sector are robust despite fluctuations in the domestic stock market. The so-called ‘big three’ shipbuilders—HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries—all initially showed a downturn right after the market opened, but returned to an upward trend by 10:50 a.m. Notably, HD Hyundai Heavy Industries and HD Hyundai Mipo Shipyard, which set a new all-time high the day before, saw their stock prices climb close to the record levels again that day.
The strong dollar appears to have boosted investor sentiment in the shipbuilding sector. The shipbuilding industry is considered a beneficiary since they receive shipbuilding costs in dollars, making it a favored stock amid the won-dollar exchange rate's benefits.
Overnight, the United States Federal Reserve (Fed) raised the median forecast for the benchmark interest rate for 2025. According to the dot plot, which illustrates future interest rate forecasts by Federal Reserve Commissioners, the number of expected rate cuts has decreased from 4 to 2 under the ‘baby cut’ (0.25 percentage point reduction). This implies a slower pace of rate cuts, leading to a stronger dollar. In the Seoul foreign exchange market, the won's exchange rate against the U.S. dollar surpassed the 1,450 won mark, reaching the highest level in 15 years.
In contrast, airline stocks, which are considered vulnerable to high exchange rates, are showing weakness. The rise in the won-dollar exchange rate could reduce demand for overseas travel and increase cost burdens. Airlines primarily settle their major expenses—fuel, maintenance, and airport-related costs—in foreign currency. For instance, even Korean Air, which has lower leasing burdens, would incur a foreign exchange valuation loss of 33 billion won if the won-dollar exchange rate rises by 10 won.
Korean Air and Asiana Airlines' stock prices fell by about 2% compared to the previous day. All airlines in the industry, including low-cost carriers like Jin Air, Air Busan, T'way Air, and Jeju Air, are exhibiting downward trends in stock prices.
The securities sector predicts that the won-dollar exchange rate will continue its strong trend for the time being and advises investments centered around export companies. The automobile industry, which has a significant share of exports to the U.S., is a prime example. In the case of Hyundai Motors, if the won-dollar exchange rate rises by 5%, the net profit before corporate tax expenses would increase by 123.5 billion won annually.
However, there are concerns that, unlike the past, the rise in the won-dollar exchange rate may not lead to strong performances for export-oriented corporations. With the U.S. under Donald Trump's second term indicating potential tariff policies, excessive profits could lead to higher tariffs.
President-elect Trump has already indicated plans to impose tariffs on Mexico, Canada, and China starting in January 2025. Kim Chan-hee, a research analyst at Shinhan Investment & Securities, noted, "It would be difficult to fully realize tariffs due to inflationary pressures, but there are concerns since the Korean automobile industry has been continuing indirect exports through Mexico."