Lee attributes weakening won to foreign investors' portfolio rebalancing

President Lee Jae Myung speaks during a press conference at Cheong Wa Dae in Seoul, Monday, marking his first year in office. Yonhap

President Lee Jae Myung on Monday attributed the won's recent weakness against the dollar to foreign investors rebalancing their portfolios after a sharp rally in local stocks, describing the Korean currency's decline as temporary.

"It is true that the exchange rate is high, but I see it as temporary," Lee said during a televised press conference marking his first year in office. "Stock prices have risen so much that they are having an unusual impact on the foreign exchange market. The stock rally has become a factor pushing the exchange rate higher."

Lee said foreign investors appeared to be selling off Korean stocks to rebalance their portfolios after the benchmark KOSPI's sharp rally.

"Korean stocks have risen too much in a short period of time. From the perspective of foreign investment funds, the share of Korean assets in their portfolios has become too large," he said. "In the short term, this is the biggest factor. But it is unlikely to continue indefinitely. Eventually, the Korean stock market will find its balance."

Lee's remarks came as the won-dollar exchange rate hovered around 1,550, pushing the Korean currency to its weakest level since the 2009 global financial crisis.

On the same day, financial authorities stepped up verbal intervention to stem the won's decline, warning that they would take firm action against excessive volatility and one-sided moves in the foreign exchange market.

Meanwhile, Lee struck an optimistic tone on Korean equities, saying that the benchmark KOSPI remain undervalued.

The benchmark index has surged more than 90 percent this year, fueled by a semiconductor-driven rally that pushed the index close to an unprecedented 9,000 mark earlier this month, far exceeding Lee's campaign pledge to lift it to 5,000.

"I was being conservative when I talked about 5,000," Lee said, saying that a boom in the semiconductor sector had significantly boosted the index.

A stock ticker in the dealing room of Hana Bank headquarters in Seoul shows the won-dollar exchange rate, KOSPI and Kosdaq indices, Monday. Yonhap

However, the KOSPI slipped back below the 8,000 mark during morning trading on Monday amid foreign selling and a broader semiconductor-sector pullback triggered by recent weakness in U.S. chip stocks.

Addressing the latest volatility, Lee said it should be viewed as a normal correction rather than a sign of a broader downturn.

"The stock market naturally fluctuates. It cannot rise every day, nor can it fall every day. It is constantly seeking an equilibrium as conditions change," the president said. "But I still believe it remains undervalued."

Turning to housing policies, Lee reiterated his determination to "normalize" the country's overheated real estate market.

"There are many issues threatening Korea's future growth potential, but the most serious among them is real estate speculation," he said. "Statistics clearly show that property prices in this country are abnormally high."

Lee said the government would seek to increase housing supply by accelerating redevelopment and reconstruction projects, while strengthening regulation on speculative buying.

"We should impose a greater burden on homes held for investment purposes rather than for actual residence, which would encourage them to come onto the market," he said. "We should also prevent people from speculating in real estate with borrowed money."

The president added the government plans to soon unveil a comprehensive package of measures covering taxes, regulations and housing supply.