Chinese Yuan Devaluation Sesen As Mixed Blessing for South Korea

luvsmiling, Aug. 13, 2015, 8:21 a.m.

China shocked global markets by devaluing the yuan for a second day running on Wednesday after a slew of poor economic data. The Korea Composite Stock Price Index plunged up to 40 points at one point during the day's trade. Shares of cosmetics maker AmorePacific dropped more than six percent due to fears of a possible decline in Chinese tourism to Korea. 

But shares of Hyundai Motor and affiliate Kia rose more than five percent on expectations of improved earnings. Export-dependent industries like car manufacturers and shipbuilders are widely expected to benefit from the yuan's devaluation.

On past precedent, a devaluation of the yuan is usually accompanied by a devaluation of the won, but industries that compete directly with Chinese exports in overseas markets or generate revenues from Chinese tourists are expected to suffer. A similar pattern was also spotted on Wednesday. The won weakened to W1,190.8 against the U.S. dollar, the lowest in three years and 10 months. 

Some experts said the devaluation would do more good than harm to the Korean economy. If Chinese exports become more price competitive, China could boost imports of Korean-made intermediate goods. But other experts warn that Chinese exports will become more competitive and eventually threaten Korean products overseas such as semiconductors, displays and petrochemical products.

comments powered by Disqus