Hyundai, Kia Find No Yen Respite in Trade Pact: David Fickling

The biggest losers today from the Trans-Pacific Partnership agreement look to be outside the zone.

Shares of Hyundai Motor and Kia Motors fell as much as 5.5 percent in Seoul, while the MSCI Japan Automobiles index gained 1.8 percent. The problem for the Koreans isn’t what’s in the deal, but what isn’t: any proposal, of the sort pushed by U.S. automakers, to penalize countries found to be artificially weakening their currencies.

Japan’s carmakers will see the elimination of U.S. import tariffs of 2.5 percent as a result of the pact. That’s small beer next to the yen’s more than 30 percent devaluation against the dollar under Prime Minister Shinzo Abe. The yen’s weakness means that Hyundai and Kia, which get respectively 30 percent and 36 percent of revenue from North America, are struggling to compete.

Japan’s not the only country that plays the foreign-exchange markets, though. While the won has appreciated 32 percent against the yen under Abe, on some measures the Korean currency still looks the more undervalued:

Seoul received stronger criticism than Tokyo in the U.S. Treasury’s April report to Congress on currency manipulators, and the next one is due later this month. Korea Inc.’s manufacturers should be careful what they wish for: A tighter U.S. focus on currencies cuts both ways.