SK Hynix raised $26.5 billion through its listing on the Nasdaq, unexpectedly easing pressures in the foreign exchange market. As large amounts of dollars are expected to flow in around the payment date on the 14th, this influx is anticipated to help alleviate upward pressure on the won-dollar exchange rate. With global funds exceeding seven times the amount raised, and additional purchases by foreign institutional investors following the listing, SK Hynix's American Depositary Receipts (ADRs) could become a new channel for foreign currency inflow.
The $26.5 billion is a significant sum. During the COVID-19 shock in 2020, the currency swap limit agreed upon by South Korea and the United States was $60 billion, but the actual amount supplied domestically fell short of $20 billion. The mere announcement of the currency swap at that time caused the won-dollar exchange rate to drop by about 40 won in a single day. This is why the current influx of funds is being viewed as 'currency swap-level' by the market. If combined with the recent dollar selling by exporters, the short-term stabilizing effect on the exchange rate could be even greater.
However, interpreting this as a signal for a stronger won would be premature. The foreign exchange market does not change structure solely due to large-scale fundraising by a specific company. Factors such as U.S. tariff policies, instability in the Middle East, international oil prices, the interest rate differential between South Korea and the U.S., and domestic investors' overseas securities investments continue to exert upward pressure on the exchange rate. Most importantly, it remains uncertain whether the dollars coming in will stay in the domestic market for an extended period.
The U.S. is publicly pressuring Samsung Electronics and SK Hynix to expand local memory production. If SK Hynix uses the funds for building factories, acquiring equipment, and covering operational costs in the U.S., the dollars could quickly flow back overseas. In fact, SK Hynix is pushing to establish an advanced packaging production base in Indiana. Regardless of how large the total amount entering the country is, if it is re-exported as investment in the U.S., the net supply of dollars in the foreign exchange market will inevitably be limited. Thus, both short-term benefits and long-term burdens coexist.
The government’s foreign exchange management must now closely monitor the flow of such funds. Relying solely on verbal interventions and expanding the National Pension Service and currency swaps when the exchange rate rises has clear limitations. It is essential to manage the impacts of corporate overseas fundraising, direct investments, institutional investors' overseas securities investments, and exporters' dollar holdings in an integrated manner.
To mitigate market shocks when large amounts of dollars flow in or out, there is a need to enhance information sharing among the government, the Bank of Korea, financial institutions, and major companies. A system for ongoing monitoring of foreign exchange supply and demand should be established to analyze the potential market impacts of corporate foreign currency procurement and overseas investment plans. The 24-hour foreign exchange market should not be limited to extended trading hours. The depth of the market must be increased, and participation from foreign financial institutions should be expanded to change the structure that causes significant fluctuations in the exchange rate for specific transactions.
It is not feasible to completely block corporate overseas investments. Local production in the U.S. may be an unavoidable choice to reduce tariff risks and secure a foothold in a key market. However, policy financing and tax support should focus more on expanding domestic advanced production facilities to prevent the hollowing out of domestic investment and employment. Mechanisms are also needed to encourage that a portion of the funds procured overseas leads to domestic research and development and production capacity expansion.
Even if there is a current account surplus, if more dollars flow out through overseas securities investments and direct investments, stabilizing the exchange rate will be difficult. It is crucial to ensure that the foreign currency earned from increasing exports is smoothly supplied to the domestic financial market. This is why it is necessary to manage not only the size of foreign exchange reserves but also the foreign currency assets and liabilities of the private sector, as well as their maturity structure and liquidity.
SK Hynix's debut on Nasdaq has demonstrated how highly Korean companies can be valued in the global capital market. At the same time, it has revealed the vulnerability of our foreign exchange market's supply and demand base, as a single company's dollar procurement can influence national exchange rates. What is needed now is not to be complacent with a temporary drop in the exchange rate. It is essential to build a structure that can stockpile foreign exchange strength when dollars flow in and absorb shocks when they flow out. Foreign exchange management should be viewed not as an event but as a fundamental aspect of national economic resilience.
* This article has been translated by AI.
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