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South Korean Won Falls Slightly on Weak Industrial Production

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South Korean won sees slight fall

The Korean won fell by nearly 0.27% on August 31, 2015, on the back of weak economic data. A major fall was prevented since there was some positive bias due to strong retail sales data coming out at 1.9%. This was well above the previous month’s figure as well as the forecasts.

Earlier, on August 28, 2015, the Korean won saw a slight fall after the military tensions between North and South Korea. In the last week, the won gained against the US dollar, as China issued a new policy for banks, dictating a tightening in currency forward, which was intended to reduce macro-financial risks. The banks would now be required to deposit 20% of their sales with the People’s Bank of China as reserves held at zero interest rates.

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Industrial production falls 0.5%

According to Statistics Korea, month-over-month industrial production fell 0.5% in July against anticipation of a rise of 0.1%. On the other hand, year-over-year industrial production fell 3.3%, overshooting the expected fall of 1%. Both figures were drastically lower compared to figures in June when there was a bounce back.

Manufacturing production also fell 3.5% in the month of July compared to a growth of 1.5% in June. The business confidence index for August came in at 68 against 70 in the previous month. The fall in exports, especially electronic parts, due to a low demand from China was one of the primary reasons for the weak data.

Impact on the market

The iShares MSCI South Korea Capped ETF (EWY) fell by 0.31% on August 31, 2015. The Korean ADRs (American Depositary Receipts) were also on a negative bias. Banking ADRs such as KB Financial Group (KB) and Shinhan Financial Group (SHG) fell 1.64% and 1.61%, respectively.

On the other hand, some technology ADRs such as SK Telecom (SKM) and LG Display (LPL) showed upticks of 0.35% and 2.77%, respectively.

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