Exchange Rate Surge Culprit Revealed: 'It's Not Foreigners' | Seo Young-soo, SK Securities Executive Director

Summary

Seo Young-soo of SK Securities argues that the recent surge in USD/KRW is driven mainly by domestic Korean outbound investment, not foreign selling. He expects the won to stay weak because pension and household allocations to overseas assets continue, while Korean long-term yields rise, credit spreads tighten, and the housing market polarizes. He also sees weak-won benefits for exporters and limited government appetite to force the exchange rate lower.

• The main driver of USD/KRW strength is Korean residents' structural overseas investment, not foreign capital flight.
• Foreigners are not reducing Korean asset exposure, and CDS/credit stress signals remain stable.
• Pension and retail asset allocation, maturing high-rate deposits, and easier overseas investing sustain the outflows.
• Korean long-term government bond yields should rise as domestic liquidity drains into risk assets, while corporate credit spreads tighten.
• Year-start pension rebalancing may reduce Korean equities and support overseas equities.
• Seoul prime housing is expected to keep rising, while regional and non-prime housing remains weak and polarized.
• The weak won benefits Korean exporters, especially semiconductors and autos, and the government is unlikely to push USD/KRW sharply below 1,400.