How KOSPI strength became KRW weakness

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How KOSPI strength became KRW weakness

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Asia FI & FX Strategy Viewpoint

How KOSPI strength became KRW

weakness

Divergence between KOSPI and KRW 18 June 2026

As one of the most obvious AI beneficiaries, Korea fundamentals appear promising – GEM FI & FX Strategy

above-trend growth, a double-digit CA surplus, a semiconductor-driven tax windfall. To Asia

many investors’ surprise, despite continued KOSPI outperformance, KRW remained Janice Xue

under pressure, with USDKRW briefly testing 1,560 on 05 June. In this note, we analyze Emerging Asia FI/FX Strategist

the seemingly counterintuitive price action in USD/KRW, with a focus on the interaction Merrilljanice.xue@bofa.comLynch (Hong Kong)

among equity markets, portfolio flows, and the exchange rate. Raghav Adlakha

EM Quant/Sovereign Strategist

KOSPI rally drove outflows and more FX hedging MLIraghav.adlakha@bofa.com(UK)

Since the start of 2026, KOSPI has rallied slightly more than 100%, with gains heavily David Hauner, CFA >>

concentrated in the two chipmakers, Samsung Electronics and SK Hynix. Both stocks are Global EM FI/FX Strategist

widely held by foreign investors, some of whom may be subject to single-stock exposure MLIdavid.hauner@bofa.com(UK)

limits. The combination of a top-heavy rally, elevated market volatility, and high foreign Claudio Piron

ownership has triggered record amounts of rebalancing-driven selling flows. Even Emerging Asia FI/FX Strategist

without outflows, global equity investors’ need to hedge their increasing currency Merrillclaudio.piron@bofa.comLynch (Singapore)

exposure amid KOSPI rally can still act as a headwind for KRW. See Team Page for List of Analysts

Domestic outflow eased, but repatriation remains limited