The won-dollar exchange rate has sharply fallen to the 1300 range, leading to mixed fortunes across different sectors. While airline stocks, which are heavily impacted by foreign currency payments for fuel and aircraft leasing, have continued to rise, automotive stocks, which rely heavily on exports, have seen their values cut in half over the past three months. The market anticipates that the strength of the won will persist, suggesting that the fortunes of these two sectors will remain divergent for the foreseeable future.
As of September 9, Korean Air shares rose to 29,800 won, an 11% increase from the closing price of 26,850 won on August 10. Compared to the closing price of 23,550 won on March 31, when the exchange rate and oil prices surged due to the U.S.-Russia conflict, this marks a 27% increase over six months. Similarly, Asiana Airlines shares increased from 6,930 won to 8,000 won, a 15% rise during the same period.
The airline industry is sensitive to exchange rates, as a significant portion of its key expenses, such as fuel and aircraft leasing, are paid in dollars. A sustained strong dollar can dampen travel demand, severely affecting core operations. With the normalization of previously soaring exchange rates, there is hope for recovery in the industry and a reduction in foreign currency debt. As of the end of the second quarter, Korean Air's foreign currency debt stood at $5.6 billion (7.5 trillion won). The company noted that for every 10 won decrease in the exchange rate, its book debt decreases by 56 billion won.
In contrast, the automotive sector, a key export industry, has struggled for several months. Hyundai Motor's shares closed at 388,000 won, down 5% from 409,000 won a month ago. Although Hyundai saw a surge in global vehicle sales and a renewed focus on its future robotics business, which led to a record high of 787,000 won on June 2, the subsequent stabilization of the exchange rate, U.S. tariffs on automobiles, and production disruptions due to strikes have caused the stock price to plummet by over 50% in three months. Kia's shares also fell to 126,800 won, a 6% decrease from 135,200 won a month ago, and down 25% from the closing price of 169,200 won in May.
Analysts predict that the decline in the exchange rate will visibly impact the export profitability of automotive companies starting in the third quarter. If the won continues to strengthen, the dollar revenue earned from exports will convert to a lower amount in won, negatively affecting performance. Yuanta Securities estimated that the increase in operating profit for Hyundai and Kia due to the exchange rate from the first quarter of 2023 to the second quarter would be approximately 3.7 trillion won and 4.3 trillion won, respectively. The Hyundai Motor Group has previously offset U.S. tariffs with favorable exchange rates, making the current downward trend in the exchange rate a burden on performance.
Meanwhile, as of 3:30 PM on the same day, the exchange rate of the won against the dollar in the Seoul foreign exchange market was recorded at 1,336 won, down 4.90 won from the previous day. This represents a 12% decrease compared to the weekly closing price of 1,549.4 won at the end of June. The exchange rate started the year in the mid-1400 won range, peaked above 1,560 won in early June, marking the highest level since the financial crisis, but has shown a steady decline since July. Analysts suggest that the exchange rate may continue to trend downward into the low 1300 won range for the time being.
* This article has been translated by AI.
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