High valued KRW will limit downside risk of regional stock market

1. Corrleation between USDKRW and Korean markets

I believe one of reasons why Korean market had rallied during last year was strong KRW.

The currency's value had rise more than 11%.

The number is much higher than those of many other EM currencies including CNY (6.20%), IDR (5.92%).

Actually, Many EM currencies like BRL, PHP or TRY recorded minus in their relative value against USD.

Market participants had taken huge long position in KRW, and KRW assets.

The beneficiaries from here were KOSPI200 stocks included in representative ETF and Korean Government securities.

KOSPI200 had risen 24.90% during last year.

Even though rising rate was lower than those of HangSeng or ISE100, it beats many EMs and DMs.

2. Strong KRW is being continued.

May 30, Italian problem attacked Asian markets, pulling KOSPI200 down more than 2%.

But attack targeting the currency isn't that hard, devaluing KRW 0.38%.

Usually, Those level attack pull KRW down at least 1%.

We can see there has been no huge outflow from Korea, even if foreingers has sold about KRW 2.2tn in regional stock market.

Devaluation in KRW has been 0.67% until end of May.

Let see other Asian EMs.

CNY has risen 1.54% in its value, but IDR, INR, TWD have lost 5.54%, 2.79%, 1.11% individually during this year.

This relatively strong KRW means that there would be enough latent buy-orders when the investors think a chance come up.

3. Financial economic situation couldn't be that good, but real economic situaton could give regional companies a glimmer.

My main suggestion about share-price of Samsung Electronics is that the price wouldn't skyrocket, but wouldn't plunge too.

Even if Morgan Stanley assert that computer chip market super-cycle should end at near future, again May 31 in CNBC.

But other banks are suggesting that a share price of Samsung Electronics should reach to KRW 3.5mn, at least.

And even if a few indices in EU suggest that recovery momentum is weakening continuously, Other regions like US, Japan or Middle-east are still good.

I believe there are enough opportunity of increasing revenues for Korean companies, specially in sectors of Software, Construction, Shipbuiling and Petrochem.

Actually, the momentum of revenues for Korean companies isn't that bad.

4. The limitaion on donwside risk for Korean market.

Actually, Korean market situation isn't that good in now.

US-North Korea summit could give short-term momentum, but couldn't drive long-term one.

Looks like the market already loses its momentum, considering the proceeding halt from Feb.

But high value of KRW and not-bad real economic momentum will exert as limitation on downside risk.

My opinion is that even if EM get additional plunge, KOSPI200 index couldn't go below 300.