Korea's "memory chip duopoly" underpins the prospect of a simultaneous rise in stocks and the currency! Citi's head of trading favors a contrarian bet on the won at the 1,400 level.

A senior trader from Wall Street financial giant Citigroup said that as South Korea's memory chip industry continues to significantly boost economic growth and supports the won's recovery against the dollar by year-end, the won's recent weakness after a strong exchange-rate rebound in June may not last long. Compared with the yen's recent appreciation, which has focused more on monetary policy normalization and exchange-rate intervention and stabilization measures, the won has strong industrial support from semiconductor exports and an improving balance of payments. Continuously expanding chip export revenue increases potential foreign exchange supply and also raises corporate demand for the local currency when investing, paying taxes, and covering operating expenses in South Korea, providing a fundamental basis for the won's medium-term recovery. What Citigroup's head of Korea trading proposed this time is to use short-term macroeconomic shocks to position for a medium-term recovery in the won, rather than concluding that the won has finished fluctuating. According to his judgment in a latest interview, a hawkish Federal Reserve and high oil prices may weaken the won further in the short term, so he views around 1,400 won per dollar as an opportunity to sell dollars and buy won, maintaining a year-end 2026 target of 1,330 won per dollar. If the AI semiconductor cycle centered on memory chips continues over the long term, exporters resume large-scale dollar selling, and Middle East geopolitical tensions ease, the won could rise in the first half of 2027 to the upper end of the 1,200-plus won per dollar range. The most important transmission link here is settlement: strong exports first create dollar income, and when companies convert it into won determines when that income forms more direct local-currency buying. This senior Citigroup trader observed that exporters sold dollars relatively quickly in July and August and currently have ample won liquidity, so they are in no hurry to continue settling recently, and even some speculative forces have taken the opportunity to short the won. This largely explains why extremely strong global demand for South Korean semiconductor product lines and export demand can coexist with a short-term pullback in the won, and it also forms the core basis for his contrarian positioning around 1,400. Citigroup's head of Korea trading: Buy won around 1,400 per dollar "Driven by external factors such as the Fed's hawkish stance and inflation concerns triggered by rising oil prices, the won faces the risk of further depreciation in the short term, pushing the exchange rate above 1,400 won per dollar," Lee Sanghun, head of Korea trading, said in an interview late Wednesday. "I don't think the won will stay at such a weak level for too long, so a level around 1,400 won per dollar will be a good opportunity to sell dollars and buy won." After two months of gains that made it Asia's best-performing currency, the won fell for a fourth straight session on Thursday, at one point dropping to 1,388.25 per dollar. The Fed's hawkish stance is weighing on the won because U.S. rate hikes widen the U.S.-Korea interest rate gap and may weaken the appeal of Korean assets. On Friday morning, the won opened steady near 1,381.00 per dollar. As shown in the chart above, after a two-month rising period, the won has recently posted a fourth consecutive day of declines. Lee said the Fed's actions prompted traders to price in further rate hikes, partially reversing the dollar-depreciation narrative. Still, given strong domestic fundamentals in South Korea, he maintained his year-end target of 1,330 won per dollar. Although Lee expects the won to strengthen further, he said the pace of appreciation is unlikely to match the past two months. Earlier this month, the won rose to its highest level in about two years. Lee said external risks could make the road ahead "bumpy," and South Korea's large current-account surplus does not necessarily mean companies will convert all dollar income into won. He also believes that if the semiconductor cycle remains strong, chip exporters resume large-scale dollar selling, and Middle East tensions ease, the won could rise in the first half of 2027 to the upper end of the 1,200-plus won per dollar range. Citing his observations during client meetings and business trips, Lee added that exporters "were too eager when selling dollars in July and August" and may now have ample won liquidity, so they are "in no hurry" to sell more dollars now. South Korea's memory chip duo strengthens the earnings foundation: Won recovery does not rely only on dollar weakness The support for the earlier strength of the yen and the won was not exactly the same: the yen focused more on monetary policy normalization and exchange-rate intervention and stabilization measures, while the won has industrial support from semiconductor exports and an improving balance of payments. Expectations of further Bank of Japan rate hikes, plus joint Japanese-U.S. yen-buying intervention in late July, had pushed the yen this month to a seven-month high of about 152.89 per dollar; after the Fed resumed rate hikes, the yen fell back to around 155.50 on September 17, reflecting the tug-of-war between domestic support and short-term dollar strength. South Korea's advantage is more directly reflected in export revenue brought by AI demand: August exports rose 68.7% year-on-year to $98.26 billion, of which semiconductor exports reached $46.65 billion, and the month's trade surplus was $34.75 billion. Judging from the balance-of-payments mechanism, continuously expanding chip export revenue increases potential foreign exchange supply and also raises corporate demand for the local currency when investing, paying taxes, and covering operating expenses in South Korea, providing a fundamental basis for the won's medium-term recovery. The appeal of South Korea's memory chip duo to global capital is already reflected simultaneously in stock price revaluation and operating profit expansion. Using the unified basis of Korean-listed common shares priced in won, as of the close on September 17, 2026, SK Hynix had risen 168.05% year-to-date and Samsung Electronics had risen 110.59%, both achieving more than double gains. What supports this performance is not only AI theme enthusiasm: SK Hynix's second-quarter operating profit reached about 60.54 trillion won, up 557% year-on-year, with high-bandwidth memory (HBM), AI server DRAM, and enterprise solid-state drives (eSSD) as key areas of its high-value-added product layout; Samsung Electronics' overall operating profit in the same period reached 89.5 trillion won, with quarterly revenue and operating profit in its memory business setting records again, and it expanded HBM4 sales. From an investment logic perspective, the memory chip duo's investment appeal to global capital comes from a complete chain of "AI infrastructure expansion drives memory demand - product mix and prices improve - profits are realized on a large scale"; for Korean equity assets, they are both a source of earnings growth in the stock market and an important pillar of exports and foreign exchange income. Moderate won appreciation is directly positive for overseas investors in Korean stocks who have not hedged currency risk - that is, the same won-denominated assets can be converted into more dollars. Using Citigroup's trading head's target as a scenario calculation, a move in USD/KRW from 1,400 to 1,330 means the won's dollar value rises by about 5.26%; assuming Korean stocks held over the same period rise 10% in won terms, the dollar-denominated return would be 1.10 x 1,400 / 1,330 - 1 = 15.79%, excluding dividends, taxes, and transaction costs. The positive significance of won appreciation for the Korean stock market is more accurately reflected in overseas investment returns and the appeal of capital allocation; earnings growth at the memory chip duo provides the stock price foundation, while a moderate won recovery is expected to add an extra layer of currency gains for international investors. Judging from the capital allocation mechanism, if earnings growth around memory chips and the entire semiconductor supply chain attracts foreign investors to increase Korean equity allocations, the corresponding currency conversion demand can strongly support the won, and an orderly won recovery can in turn improve dollar returns for unhedged investors, thus forming a potential positive stock-FX interaction; however, stock price gains alone cannot be taken as proof that net foreign inflows have already occurred. South Korea's central bank has also clearly pointed out that stock gains, current-account surpluses, and the won exchange rate do not necessarily move in sync, and cross-border capital flows and corporate local-currency demand jointly determine the actual transmission. Memory chips - crucial to South Korea's exports and even the South Korean economy. South Korea is home to the world's two largest memory chip manufacturers - SK Hynix and Samsung, among which SK Hynix, the global HBM leader, has in recent years been the core HBM memory system supplier for Nvidia. South Korea's other memory giant, Samsung, is the world's largest supplier of DRAM and NAND memory chips, and has recently also become an HBM supplier to Nvidia, especially becoming the HBM memory system supplier for Nvidia's current flagship AI computing cluster products, the GB200/GB300 series. AI server memory chip components remain the clearest supply bottleneck in the AI computing supply chain. TrendForce estimates that server DRAM contract prices will cumulatively rise about 270% in 2026, and enterprise SSD prices will cumulatively rise about 235%; in 2027, HBM contract prices may still rise 70%-140%. These data reflect the combined effect of AI computing expansion and memory price increases. TrendForce's latest estimate is that DRAM and NAND combined will account for 47% of major cloud service providers' capital expenditure in 2026, rising to 68% in 2027, driven by both higher purchase volumes and higher prices.