Foreign Selling of Samsung, SK Hynix Nears $73 Billion, Pushing Won Toward 1,520

Foreign investors have sold a net 92 trillion won ($67.2 billion) of South Korean stocks this year

Rebalancing-driven selling is fueling the outflows

A rise in 30-year U.S. Treasury yields above 5.2% has also added pressure

The won’s real purchasing power has fallen to its lowest since the global financial crisis

“Foreign investors are the villain.”

That is how market participants and officials at South Korea’s foreign-exchange authorities described the won’s slide toward 1,520 per dollar. Foreign investors have been net sellers of almost 100 trillion won of South Korean equities this year, increasing upward pressure on the exchange rate. As gains in semiconductor stocks such as Samsung Electronics and SK Hynix boosted Korea’s weight in global portfolios, pension funds and passive managers have mechanically cut holdings to rebalance allocations. Amid the heavy foreign selling, the won’s purchasing power has fallen to its lowest level in 17 years since the global financial crisis.

In Seoul trading, the won closed at 1,517.4 per dollar at 2 a.m. on May 23, up 11.3 won from the previous session. That was 0.2 won above the regular daytime close of 1,517.2 at 3:30 p.m. on May 22. On an overnight closing basis, it was the highest since March 30, when the currency ended at 1,518.2 per dollar.

A rise in U.S. Treasury yields is one of the main drivers of the won’s weakness. The 30-year Treasury yield briefly climbed to 5.20% on May 19. It was the first time the yield had topped 5.2% since July 2007, before the global financial crisis.

The 10-year Treasury yield also briefly rose to 4.69%, the highest since January 2025. Long-dated yields later eased, ending May 22 at 5.06% and 4.56%, respectively. Markets view the move as reflecting renewed inflation concerns and the possibility of another Federal Reserve rate increase.

Higher U.S. Treasury yields tend to pull global capital into dollar assets by offering relatively better returns. That increases demand for the dollar and puts the won under pressure. Rising market rates also reinforce demand for safe-haven assets, adding to dollar strength.

Foreign investors’ rebalancing sales have compounded the won’s decline. The Korea Exchange said foreign investors held 2,600.3578 trillion won ($1.90 trillion) of domestic stocks as of May 22. That compared with 711.9833 trillion won ($520.4 billion) a year earlier on May 22, more than triple the level. The increase reflected a surge in the market capitalization of semiconductor stocks including Samsung Electronics and SK Hynix, which rapidly lifted South Korea’s weighting in global emerging-market portfolios.

Many global pension funds and sovereign wealth funds tightly manage target allocations by country and asset class. When South Korea’s weighting rises above target because of stock gains, they automatically trim Korean holdings through rebalancing. Norway’s sovereign wealth fund, for example, targets a 70% equity allocation and mechanically rebalances when the actual weighting deviates by more than 2 percentage points from that goal.

Foreign net selling is also directly affecting the foreign-exchange market. After selling local equities, foreign investors convert won into dollars, adding pressure on the exchange rate. Market participants say dollar demand from foreign rebalancing is now stronger than dollar-selling flows from exporters such as Samsung Electronics and SK Hynix.

The won’s value has fallen into the bottom tier among major currencies. According to the Bank for International Settlements, South Korea’s real effective exchange rate stood at 85.06 in April, based on 2020=100. The measure has declined for three straight months since January, when it was 87.02, and fell to its lowest level since March 2009, when it was 79.31, in the aftermath of the global financial crisis. The real effective exchange rate measures a currency’s purchasing power after adjusting for exchange rates and inflation relative to trading partners. A reading below 100 is generally interpreted as indicating undervaluation versus the base year.

In cross-country comparisons, the won also ranks near the bottom. Last month, South Korea’s real effective exchange rate ranked 63rd out of 64 countries, second-lowest only to Japan’s 65.7.

Kim Ik-hwan, Hankyung.com reporter lovepen@hankyung.com