Global Strategy "Korea's Record Equity Outflows and KRW: We answer Top FAQs ..."

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Global Strategy "Korea's Record Equity Outflows and KRW: We answer Top FAQs ..."

Global Research

4 June 2026ab

Global Strategy Global Strategy

GlobalKorea's Record Equity Outflows and KRW: We

answer Top FAQs Rohit Arora

Strategist

rohit-b.arora@ubs.com

+65-6495 5232

The KRW Conundrum: Resilience Everywhere in Korea - Except FX Teck Quan Koh

The Won is a classic case of strength backfiring. Macro fundamentals have rarely looked Strategist

better. Semiconductor exports are soaring, KOSPI is booming, domestic demand is teck-quan.koh@ubs.com

+65-6495 4416

resilient, and the BoK is guiding for rate hikes. Yet, the Korean Won has continued to

weaken, leaving it deeply undervalued. Recent FX underperformance has been less Yong-Suk Son, CFA

about fundamentals failing and more about flows overwhelming them - wherein Kospi’s Analyst

parabolic rally turned into a drag on the Won. yongsuk.son@ubs.com

+82-2-3702 8804

What caught us off-guard is the intensity of recent non-resident equity outflows (~20 SD

divergence in flows vs. Equities performance in May). Near term, this technical pressure

may persist: every 10% of KOSPI outperformance vs EM/Asia benchmarks could trigger

$15bn of outflows, while a hawkish FOMC may also keep broad dollar elevated.

Our bullish KRW view hasn’t played out as expected, but the core thesis remains intact -

albeit on a delayed timeline. Offsetting near-term technical headwinds, a longer

memory cycle should help sustain an elevated current account surplus (>20% of GDP,

3mma). In fact, the onus is on the capital account to keep absorbing an otherwise large

wall of dollar supply ahead; we expect outflows to moderate in 2H relative to 1H. With

valuations still >10% cheap, we retain a relatively constructive view on KRW, particularly