Won Falls Most in Emerging Markets After Samsung Profit Slumps

Breaking Down Samsung's 4Q Earnings
  • South Korea's currency is Asia's worst performer this year
  • Global funds sold net $2.5 billion of local shares in January

The won dropped the most among emerging market currencies as global funds pulled money from South Korean stocks after Samsung Electronics Co.’s earnings missed analyst forecasts.

Foreigners sold more Kospi index shares than they bought Thursday as Samsung reported a 39 percent drop in fourth-quarter net income on slowing demand for high-end devices. The world’s biggest smartphone maker estimated an adverse impact of around 400 billion won ($331 million) as the currency strengthened in the period. The won also fell as the Federal Reserve on Wednesday signaled financial-market turmoil may pose risks to its outlook for the U.S. economy, while maintaining its policy stance at its two-day meeting.

The won weakened 0.5 percent to close at 1,208.55 a dollar in Seoul, data compiled by Bloomberg show. The currency reached 1,211.20, the lowest since Jan. 21, and its 3 percent drop this month marks Asia’s worst performance. It strengthened 1.1 percent in the fourth quarter of 2015. Global funds have sold a net $2.5 billion of local shares in January.

"Samsung’s below-expected earnings can accelerate the drop in stocks and fuel outflows, which will drag the won lower," said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc., who recommends selling the won against the dollar with a target level of 1,212 in the short term. "The Fed’s policy guidance was interpreted as being not dovish, and that puts downward pressure on emerging-market currencies."

South Korean authorities will strengthen monitoring of major economies and act preemptively if needed, the Finance Ministry said in a statement. The government said it plans to flexibly adjust capital-flow management measures, such as limits on banks’ currency forward positions, to stabilize financial markets amid external risks.

North Korea may be getting ready to launch a long-range ballistic missile following its fourth nuclear test early this month, Japan’s Kyodo News reported. Satellite imagery analysis in recent days indicates preparations are underway, Kyodo said, citing an unidentified person in the Japanese government. South Korea has been concerned North Korea may conduct a surprise launch in a follow-up to its Jan. 6 nuclear test, Defense Ministry spokesman Kim Min Seok said in Seoul Thursday.

Government bonds fell, with the three-year yield rising one basis point to 1.62 percent, Korea Exchange prices show. The yield on 10-year sovereign notes was little changed at 2.02 percent, after reaching a record low of 1.99 percent on Tuesday.

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