[Business & Issues] Rising Exchange Rate Increases Dollar Outflow Burden from Foreign Dividends

Samsung Electronics Pays 1.35 Trillion Won in Q3 Dividends to Foreign Investors
30% of Domestic Dividends Go to Foreign Shareholders
Prolonged High Exchange Rates Could Hurt Corporations

On the 27th, the USD-KRW exchange rate is displayed on the electronic board in the dealing room of Hana Bank headquarters in Jung-gu, Seoul. Photo by Yonhap News.

As the USD-KRW exchange rate remains stubbornly high in the 1,460-1,470 won range, the burden on companies to pay dividends to foreign investors is also increasing. With about 30% of all corporate dividends being paid to foreign shareholders, the potential outflow of dollars overseas could further fuel exchange rate volatility. If the upward pressure on the exchange rate persists and the USD-KRW rate surpasses the 1,500 won mark for an extended period, there are growing concerns that it could have a negative impact across the entire industrial sector, including major export companies.

More Than Half of Samsung Electronics’ Q3 Dividends Go to Foreign Investors, Affecting the Exchange Rate

On November 19, the USD-KRW exchange rate in the Seoul foreign exchange market closed at 1,469.50 won, up 8.5 won from the previous day. On the same day, Samsung Electronics paid out 2.4553 trillion won in third-quarter dividends, with more than half-$922 million (approximately 1.35 trillion won)-going to foreign investors. This was cited as one of the factors contributing to the rise in the exchange rate. As the dividends received by foreign investors are gradually converted to dollars and remitted overseas, this process is considered a key driver of upward pressure on the exchange rate.

Among the top KOSPI-listed companies by market capitalization, many have foreign ownership ratios exceeding 50%, resulting in substantial dividend payouts to foreign investors. Samsung Electronics has a foreign ownership ratio of 52.27%, SK Hynix 53.39%, Hyundai Motor 35.51%, Hanwha Aerospace 43.88%, and KB Financial Group 75.81%, all with foreign stakes above 30%.

According to the Korea Securities Depository, last year, foreign investors received 9.7951 trillion won in dividends from the domestic stock market, accounting for 30.3% of the total 32.2956 trillion won in dividends. This amounts to about $6.7 billion. With the government and the ruling party pushing for separate taxation of dividend income since July, and companies strengthening their dividend policies, the amount of dividends paid to foreign investors is expected to increase significantly in the future.

Exchange Rate Surges Before and After Korea-US Tariff Negotiations... High Rates Persist in the 1,460-1,470 Won Range

This year, the USD-KRW exchange rate surged sharply before and after the conclusion of the Korea-US tariff negotiations. When the Lee Jaemyung administration took office, the exchange rate stood at 1,363.5 won, but by October 29, when the negotiations were finalized, it had risen to 1,427.5 won, and has soared to the 1,460-1,470 won range this month. As part of the agreement, a total of $350 billion in investments to the United States was pledged, raising expectations of a significant outflow of dollars to the US.

Recently, as the value of the dollar has soared, companies seeking foreign exchange gains have increased their dollar holdings, further contributing to the rise in the exchange rate. According to the Bank of Korea, the average monthly balance of corporate foreign currency deposits in the third quarter of this year reached a record high of $91.88 billion (approximately 13.4 trillion won). This is attributed to export companies holding onto the dollars they receive from overseas sales and delaying conversion to won.

Individual investors’ net purchases of overseas stocks are also seen as a factor in the rising value of the dollar. According to data compiled by the foreign exchange authorities through November 25, domestic investors’ net purchases of overseas stocks reached $28.8 billion (about 4.2 trillion won), more than 2.8 times the total net purchases of $10.1 billion last year. At a press briefing on November 27, Bank of Korea Governor Rhee Changyong stated, "Recently, there has been a pronounced trend of the dollar strengthening and the won weakening, rather than just exchange rate volatility. We are concerned that this is being driven by domestic investors’ overseas stock investments. The trend of overseas investment becoming a craze is worrisome."

Externally, analysts point to the rapid depreciation of the yen since Sanae Takaichi took office as Japan’s prime minister as another factor driving up the value of the dollar. In the Tokyo foreign exchange market last month, the yen depreciated by 3.6% against the dollar, a sharper decline than other key currencies such as the pound (-2.1%) and the euro (-1.4%). Park Sanghyun, a researcher at iM Securities, noted, "Since Sanae Takaichi became Japan’s prime minister, expectations of fiscal expansion and weaker signals of additional rate hikes from the Bank of Japan have led to a weaker yen against the dollar."

If the USD-KRW Rate Surpasses 1,500 Won, Fears of Exchange Rate Shock Grow... US Rate Cuts a Key Variable

Yonhap News Agency

If the upward pressure on the USD-KRW exchange rate continues and it surpasses the 1,500 won threshold, there are concerns that the resulting increase in import prices and the decline in the value of won-denominated assets could deal a blow to major exporters, the construction sector, and the broader industrial landscape. Given the high proportion of imported raw materials in Korea’s industrial structure, production costs are expected to rise significantly.

According to an analysis commissioned by Assemblyman Park Yonggap of the Democratic Party of Korea and conducted by the International Trade & Commerce Research Institute at the Korea International Trade Association in April, if the USD-KRW exchange rate exceeds 1,500 won, domestic manufacturing production costs would increase by 6.58% compared to 2023, construction costs by 3.34%, and service sector costs by 2.292%.

However, there are also forecasts that if the US moves more decisively toward rate cuts and the macroeconomic environment improves, the USD-KRW exchange rate could gradually decline starting next year. Kang Minjoo, Senior Economist at ING Bank, stated in the "2026 Exchange Rate Outlook Report," "If the US Federal Reserve cuts rates as expected in December and the semiconductor cycle drives exports, the macroeconomic environment is expected to improve. Considering additional rate cuts by the Fed in 2026, the value of the won could show a gradual upward trend."