KRW: Holding Above 1400 As We Enter Holiday Period, HSBC Notes Domestic Outflows
A reminder that South Korean markets are out until next Friday (for the Harvest Moon and National Foundation day breaks). Spot USD/KRW ended Thursday trade at 1406.35, just off intra-session highs. We remain within striking distance of late Sep highs, near 1414, which is close to the simple 200-day MA. The pair is above all key EMAs. The 50-day, now a support point, is back closer to 1392.
- Equity related news flows has been quite positive so far this week, aided by AI/chip optimism. We had Samsun and SK Hynix buoyed yesterday by deal with OpenAI to supply chips for its Stargate project. This saw over $2.2bn in offshore inflows.
- The Kospi closed at record highs near 3550 on Thursday. Still, a decent wedge remains with spot USD/KRW lagging these positive trends.
- Tech/chip optimism may also benefit the export outlook even with higher US tariff levels.
- HSBC notes though despite the strong inflow backdrop, we are also seeing strong domestic outflows. "The NPS bought USD3.6bn worth of foreign equities and bonds in August, while other financial institutions bought USD3.3bn and retail investors USD1.4bn. Retail outflows likely surged to USD4bn in September, according to a separate high frequency data source. The topic of outward direct investments by corporates have been in focus recently because of Korea’s contentious USD350bn investment pledge offered to the US – which remains under negotiation."
- Such outflows, coupled with uncertainty around trade deal progression, is a counter point to these positives for the won outlined above. As noted yesterday, optimism around scope for a swap deal didn't appear high from South Korean officials.
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