Gauging the impact of outflows on KRW

Research evidence excerpt

Gauging the impact of outflows on KRW

Barclays | FX Views

these investments, any benefits for the KRW are more likely to emerge as a structural tailwind

rather than a near-term catalyst for appreciation.

A step towards decoupling Korean equities from the KRW

That said, the SK Hynix ADR listing could also have important longer-term implications for

Korea's equity-flow dynamics. A liquid US-listed share class would allow foreign investors to

gain exposure to SK Hynix without taking direct KRW currency risk. To the extent that future

portfolio allocations are increasingly directed toward the ADRs rather than the domestic listing,

fluctuations in foreign investor demand for SK Hynix would generate less associated demand

for buying or selling KRW.

This should reduce the sensitivity of the currency to large swings in foreign investor positioning

in one of the Korea equity market's most important stocks and, at the margin, likely weaken the

historical linkage between foreign equity flows and KRW performance. More broadly, it would

represent another step toward decoupling Korea's equity market from the currency, particularly

during periods when foreign participation is concentrated in a small number of large-cap

technology names.

Relentless foreign selling

FIGURE 1. The magnitude of foreign selling YTD has dwarfed previous FIGURE 2. Foreign equity outflows have become the biggest source of

foreign equity outflows from Korea portfolio capital pressure

Korea net equity flows (USDbn) USD bn Portfolio investment by type

20 16

0 8

-20 0

-4

-40 -8

-12

-60 -16

-20

-80 -24

-28

-100 -32

-36

-120 -40

-44 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Sep-25 Mar-26

Residents' equity PI Residents' debt PI 2020 2021 2022 2023