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Biden wins to accelerate the dollar
The value won exceeds the maximum for the whole year
Q4 earnings emergencies such as electricity and electronics
Companies are experiencing a double problem following the “export logistic turmoil” as the value of the won continued to be very strong in the fourth quarter. There are observations that the win / dollar exchange rate will drop further (the value of the win will rise) while American Democratic presidential candidate Joe Biden, who has promised a bold economic stimulus, wins. Companies plan to run an emergency scenario if it falls below the 1,100 won per dollar level.
On the 6th, the won-dollar exchange rate in the Seoul foreign exchange market ended with 1120 won 40 earlier, down 7 won 80 earlier the previous day. Based on the closing price, it reached a new low, and is the lowest level in about 1 year and 9 months since February 27 last year (1,119 won before 10). In the market, there are observations that the win-to-dollar exchange rate could fall below the 1,100 won line when candidate Biden wins. The strong won value will devour the performance of exporting companies. This is because price competitiveness decreases and profitability deteriorates. The Hyundai Research Institute analyzed that if the dollar exchange rate fell by 1%, total exports fell by 0.51%.
The auto industry, which is fiercely competitive with Japan and Germany in the global market, is sensitive to the appreciation of the win. Hyundai Motor Company, which had earned 100 to 200 billion won in quarterly operating profits due to the weak won through the third quarter of this year, will have to return the profits in the fourth quarter. In the first half of 2018, when the won-dollar exchange rate was below the 1,100 won line, Hyundai Motor’s operating profit fell 37.1% from the same period last year. An auto industry official said: “If the won-dollar exchange rate drops below 1,100 won, every company will have to deal with an emergency scenario.”
Samsung Electronics and LG Electronics, which posted record operating profits in Q3, are also expected to experience a worsening of earnings in Q4 due to a decline in the won / dollar exchange rate. Petrochemicals and steel, which have a high percentage of imported raw materials, will also benefit from some advantages, but exports are inevitable.
Reporter Kim Il-gyu [email protected]
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