EXCHANGE CORNER

U.S.-Chinese Equities Diverge, Drivers of the Korean Won

Nov 03, 2021

Economic Research

U.S.-Chinese Equities Diverge;
Factors Driving the Korean Won

Erik Norland, Senior Economist
CME Group

Stock Market Slumps in China, Rallies in U.S.

Chinese stocks tumble 20% even as U.S. equities rally to record highs.
High corporate debt, widening credit spreads weigh on Chinese stocks.
China’s growth slowed in Q3, energy crunch raising production costs.
China might ease monetary policy while U.S., U.K. expect higher rates.

Factors Driving Korean Won-U.S. Dollar Exchange Rate

Won-dollar rate has kept within 20% trading range since 2010.
S. Korea’s trade surplus has underpinned won’s stability since 1998.
Interest rate differentials play small role in the won’s value.
Recent weakness in won could be due to expected Fed rate hikes.

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