Bloomberg the Company & Products

Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Goldman Says Sell Won as BOK Easing Likely: Korea Markets

Japanese Yen and South Korean Won
Korean exports will see a “significant” impact should the yen fall further, while currency volatility poses the biggest risk to Asia’s fourth-largest economy, according to minutes of last month’s central bank board meeting released on Dec. 31. Photographer: SeongJoon Cho/Bloomberg

Jan. 7 (Bloomberg) -- Goldman Sachs Group Inc. recommends selling the South Korean won and the most-accurate forecaster Scotiabank sees possible interest-rate cuts, as exporter earnings are wrecked by currency appreciation.

Goldman yesterday predicted a 3.1 percent drop in the won against the dollar, after a 9.8 percent gain in the past two years against the greenback and a 50 percent rally versus the Japanese yen. Seven large exporters based their 2014 forecasts on an average exchange rate of 10 won per yen, 12 percent stronger than last year’s 11.23, according to a December survey by Korea Trade Insurance Corp.

Samsung Electronics Co. reported today fourth-quarter profit missed analysts’ estimates, after Hyundai Motor Co. last week predicted the slowest sales growth in eight years. Bank of Korea Governor Kim Choong Soo may lower the benchmark rate by a quarter-percentage point as early as Jan. 9 to mitigate the won’s gains and spur growth, Goldman forecast.

“Exporters are starting to feel the pinch from the exchange rates,” Kwon Goohoon, Goldman’s Seoul-based economist, said by phone yesterday. “There seems to be no other immediate policy options than a rate cut to support growth.”

Korean exports will see a “significant” impact should the yen fall further, while currency volatility poses the biggest risk to Asia’s fourth-largest economy, according to minutes of last month’s central bank board meeting released on Dec. 31. Finance Minister Hyun Oh Seok said on Jan. 3 that the authorities are closely monitoring the yen’s volatility and President Park Geun Hye said the Japanese currency’s weakness was a burden eroding South Korean companies’ competitiveness.

Samsung Earnings

Seoul’s main bourse got off to the worst start since 2007 after Hyundai Motor and Kia Motors Corp. on Jan. 2 predicted a 4.1 percent increase in 2014’s combined deliveries, the slowest since 2006, and as analysts cut estimates for profit at Samsung Electronics. The Kospi index fell 2.6 percent since Dec. 30 as foreign investors sold more shares than they bought.

The won touched 9.96 versus the yen on Jan. 1, the highest since September 2008, and fell 0.3 percent to 1,068.46 per dollar at 10:16 a.m. in Seoul, having reached a five-year high of 1,048 last week.

Shares in Samsung Electronics, which got 85 percent of sales from outside its home market in 2012, slid 4.8 percent this year. Operating profit was 8.3 trillion won ($7.8 billion) in the final quarter, the Suwon, South Korea-based company said in a statement today. That compares with the 10 trillion-won average of 32 analyst estimates compiled by Bloomberg.

Currency Fluctuations

“Samsung Electronics is paying close attention to global foreign-exchange trends and strives to protect its interests against currency fluctuations,” the company said in a Jan. 3 e-mailed statement in response to questions. It couldn’t confirm a Nov. 29 report by the Korea Economic Daily that the company has based 2014 plan on a rate of 1,050 won per dollar.

Foreign investors bought a net 3.1 trillion won of Kospi stocks last year, while dumping Indonesian and Thai shares, exchange data show, as South Korea is positioned to benefit from a recovery in the U.S. and Europe.

Overseas shipments, which account for about half of Korea’s economy, will increase 6.4 percent in 2014, after an estimated 2.2 percent gain last year, the trade ministry said on Jan. 1.

A stronger won brings down import costs, helping companies counter falling overseas income. Steel giant Posco is seeking a natural hedge by paying for imports of raw materials in foreign currency earned abroad, spokesman Jeong Yong Min said in a Jan. 3 e-mail.

‘Crying Foul’

Smaller exporters with fewer hedging tools are “crying foul over what they see as an unfair advantage Japanese rivals are gaining from the retreating yen,” Oh Joo Hyun, Korea Trade’s head of foreign exchange risk management, said Jan. 3.

In Japan, Toyota Motor Corp. will post a record operating profit of 2.4 trillion yen for the year ending March 31, according to a Dec. 30 report from the Sankei Newspaper. The Bank of Japan, which has embarked on an unprecedented stimulus and debased its currency, has scope to expand purchases even more, according to 71 percent of economists polled by Bloomberg.

Rising Risk

“Korean policy makers may now become more vocal as risks rise in respect to an erosion of Korea’s external position,” Sacha Tihanyi, a Hong Kong-based strategist at Scotiabank, said yesterday. “Risks are rising and I’d be looking for the won to weaken off for a bit, particularly given the weaker levels of the yen. There is also the rising risk that the Bank of Korea eases policy as a counterweight to won strength.”

The won will decline to 1,070 versus the dollar by the end of March, Tihanyi forecasts. That’s weaker than the median estimate of 1,064 in a Bloomberg survey of 37 strategists. He predicted the won will strengthen to 9.54 against the yen at the end of 2014.

Goldman recommended selling the won with a target of 1,100 per dollar, without specifying a timeframe. The yield on five-year sovereign debt fell five basis points this week to 3.26 percent, amid speculation the Bank of Korea will trim the key rate from 2.5 percent. The yield added 26 basis points in 2013. All 15 economists surveyed by Bloomberg News expect no change this week.

Consumer inflation has stayed below the BOK’s target range of between 2.5 percent and 3.5 percent since May 2012. South Korea’s current-account surplus will narrow to $38 billion this year after reaching $63 billion last year, while the economy will expand 3.8 percent from an estimated growth of 2.8 percent in 2013, according to central bank projections.

“Korea is a victim of its own success as the economy is in better shape than most Asian neighbors,” Suresh Kumar Ramanathan, regional currency strategist in Kuala Lumpur at CIMB Investment Bank Bhd., said in a Jan. 3 interview. “The won’s strength has become a problem for exporters like Samsung. It can be quite dangerous and policy makers can’t intervene or engage in a race to the bottom without causing a reaction elsewhere in the region.”

To contact the reporters on this story: Kyoungwha Kim in Singapore at; Kyung-Jin Kim in Seoul at

To contact the editors responsible for this story: Sandy Hendry at; Amit Prakash at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.