Automotive provider trailers loaded with autos for export are lined up at Pyeongtaek Port in Gyeonggi Province, Monday. Yonhap
Korea is more and more headed towards Taiwan’s polarized financial path amid the unreal intelligence (AI) increase, the place solely a handful of AI-related exporters make earnings whereas home demand stays largely stagnant, based on brokerage experiences Monday.
Two experiences, each launched by DB Securities analysts, famous that this polarization is exacerbated by the weakening of the Korean received in opposition to the U.S. greenback, much like improvement’s with Taiwan’s forex, the New Taiwan greenback.
The experiences defined that the Korean forex’s depreciation is prompting exporters to maintain their earnings in U.S. {dollars} for abroad investments relatively than changing them into received, to keep away from losses from the weak native forex.
These practices additional diminish home funding, family revenue, shopper spending and different financial actions at residence.
“The Korean financial system is starting to resemble Taiwan’s, and that’s certainly not a praise,” wrote Moon Hong-cheol, a senior analyst at DB Securities, in a report titled “Taiwan, the Way forward for Korea below Foreign money Depreciation.”
Whereas Moon didn’t particularly point out exporters, he implicitly drew a parallel between Korea’s main chipmakers — Samsung Electronics and SK hynix — and Taiwan’s TSMC, with all three posting third-quarter earnings above market estimates amid the AI revolution.
Samsung Electronics posted a web revenue of 12.2 trillion received ($8.6 billion), up 21 % from a 12 months earlier, whereas SK hynix noticed a 119 % improve to 12.6 trillion received.
TSMC recorded a 39.1 % rise to 452.3 billion New Taiwan {dollars} ($14.7 billion).
Moon additionally famous that when it comes to market capitalization, Samsung Electronics and SK hynix collectively account for greater than 25 % of the benchmark KOSPI, whereas TSMC occupies greater than 30 % of the Taiwan Inventory Alternate.
“Underneath these circumstances, funding by Korean corporations at residence would assist stimulate home demand, however as seen in TSMC’s case, they’re relocating their factories abroad, together with to the USA,” he commented.
The analyst additionally identified that Taiwan has been experiencing chronically sluggish home demand in addition to accompanying socioeconomic challenges similar to low youth employment, cautioning, “Korea is now shifting onto the same path.”
One other DB Securities analyst, Kang Hyun-gi, voiced the same view in a separate report on the mechanism behind a recession-type bull run within the inventory market.
“The present AI-led bull market is uncommon as a result of, not like the dot-com or housing bubbles, it’s occurring regardless of slowing financial development and weak family spending energy,” Kang wrote.
Concerning the forex, Moon famous that Korean exporters desire holding earnings in U.S. {dollars}, because the won-dollar alternate price stays constantly above the worrisome 1,400 mark, making conversion into the native forex much less enticing.
He additionally identified that Taiwanese exporters have been doing the identical, benefiting from deliberate depreciation pushed by financial insurance policies.
“Such depreciation is actually like taking away households’ buying energy to offer a subsidy to exporting corporations,” Moon mentioned.
