By Kim Yoo-chul
Staff Reporter
The drop in the won's value against the dollar is a double-edged sword for the economy, with a major beneficiary being export-driven IT companies.
The domestic currency this week fell to as low as 1,062.6 per dollar, the weakest since December 2004, as mounting worries over the fallout from credit market woes dented foreign preference for risk.
Currency dealers say the won is forecast to fall further due a rebound in oil prices and persistent fears of an economic slowdown despite caution over possible intervention by currency authorities.
Authorities are likely to keep in check the speed and degree of the won's fall rather than intervene. Foreigners were net sellers of domestic shares worth 2.4 trillion won this month, having net sold 4.9 trillion won last month.
"Considering global outsourcing expenses, the recent won-dollar rate is nothing to brag about. But if the exchange rate drops 10 won, we expect won-denominated sales to rise 300 billion won," a Samsung Electronics source said.
Exports account for 80 percent of Samsung's sales. In the second quarter, the electronics giant reaped an additional 300 billion won in sales thanks to the weakening won, sources say.
Cross-town rival LG Electronics is also benefiting as the weaker won raises the company's competitiveness with its overseas rivals in key European and North American markets.
"When the won-dollar rate drops 10 won, then we expect to gain some 70 billion in won-denominated sales," an LG spokesman said. In the second quarter, LG earned 100 billion won in additional sales thanks to the exchange rate.
"But we are concerned over the rising prices of imported raw materials and poor demand for electronic gadgets as continued credit woes hit consumer spending in key markets," he added. LG originally set the won-dollar rate in the range of 885-900 won for this year.
Hyundai Motor is another beneficiary of a weaker won. When the won-dollar rate drops 10 won, the company's operating profit rises 120 billion won.
"Rising materials costs are a burden. But we are better positioned to push aggressive marketing in the highly competitive North American and European markets," a Hyundai source said.
Airline, Steel, Oil Firms Suffering
Airliners, steel makers and oil refiners, however, are suffering from the weaker won in the wake of surging prices for imported raw materials.
"If the won continues to weaken, then operating losses in the third quarter will rise," a Korean Air source said. The national carrier loses 22 billion in profits whenever the won-dollar rate weakens 10 won.
Korean Air suffered 288.9 billion won in losses in the second quarter mainly because of the weakening won and rising oil prices.
Oil prices are going above $120 a barrel on mounting tension between the United States and energy giant Russia.
POSCO and GS Caltex said unfavorable foreign exchange movement is burdening them further. GS Caltex is estimated to have lost 100 billion won in the first half because of the weaker won.
"The dollar's growing strength has further raised speculation that the won will eventually weaken further, and in turn prompt traders to reduce their holdings in the domestic currency," said a POSCO source.
yckim@koreatimes.co.kr
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