Expats, Korean Exporters at Odds over Rising Won

With a good chunk my money going back home, I have been watching carefully the rising value of the Korean won. The latest quote was 1,211 won to the US Dollar and was as high as 1,320 earlier this year. I relish every won it goes up. For me, that means that when I send money home, I get more dollars for the same amount of won – my net worth rises. Anyone who’s been here long enough to send back cash well understands this fundamental bit of economics. Economists are predicting that with heavy investments from foreigners (not you, dear English teacher, but real heavyweights in finance) and a weakening dollar the won will continue to drop, they say, to around the 1,000 mark. Likely, it will average around 1,130.

Don’t bet on  the won continuing to rise too terribly much, however.   Korean exporters, such Hyundai, Samsung, LG and many other titans of industry rely on a relatively low won to fuel their profit bottom line. A rising won erodes profits endangers their global competitiveness.

Hyundai Motors calculates that if the won went up a mere 10 won, it would drop 1% off of their net profit. Given the latest rise in value, they are predicting a drop in profit of 22%.

Remember, though, that companies like Hyundai and Samsung are not just giant corporations who must rely on their own wit to scour a profit from their efforts. They are a uniquely Korean entity known as a Jaebol – a government supported, family-run conglomerate that helps shape and be shaped by government policies. The Jaebols are powerful and quite often, their executives end up running portions of the government.

So even though a rising won is good for domestic spending and very good for the expat such as you and I, it is not good for the jaebols of Korea. My advice to you would be to make hay while the sun shines anywhere near 1,000 won and then pull back before it comes back up again where the jaebols’ profits begin to take precedence over consumers.