Summary
South Korean stocks and the won are sending conflicting signals.
Between September 30 and October 23, 2026, the KOSPI fell 18.8%, while the USD/KRW exchange rate declined 2.1%, indicating a stronger won. Foreign investors continued to sell Korean equities, but the currency did not follow the stock market lower.
The explanation lies in two different forces: investors are reassessing Korean equity valuations, particularly in AI-related stocks, while export earnings and corporate dollar sales are supporting the currency.
For investors, the key question is whether the won’s resilience signals a more stable financial backdrop—or simply masks continued pressure on Korean stocks.
Key Takeaways
- ✓ The KOSPI has fallen 18.8% since September 30, while USD/KRW has declined 2.1%.
- ✓ Foreign investors sold approximately KRW 17.4 trillion of KOSPI shares from October 1–22 and another KRW 981 billion on October 23.
- ✓ The Bank of Korea has identified increased dollar selling by exporters as a factor behind the stronger won.
- ✓ Currency resilience reduces foreign investors’ exchange-rate losses, but it does not establish that equity selling has ended.
- ✓ A more durable stock-market recovery requires improving earnings expectations and a reversal in foreign equity flows.
What Happened
Stocks fell. The currency strengthened.
The KOSPI closed at 5,550.30 on October 23, compared with 6,838.04 on September 30—a decline of 18.8%.
Over the same period, the onshore USD/KRW exchange rate moved from KRW 1,352.8 to KRW 1,324.6 per dollar. A lower USD/KRW rate means the won has appreciated.
The divergence persisted despite substantial foreign selling. According to Korea Exchange figures reported on October 22, overseas investors had sold a net KRW 17.4 trillion of KOSPI shares during the month.
October 23 offered another revealing example. The KOSPI recovered from an intraday decline of more than 4% to finish 0.3% higher, helped by a rebound in SK hynix. Yet foreign investors still sold a net KRW 981 billion of shares.
The market bounced. Foreign money did not return.
Why It Matters
Equity selling does not determine the exchange rate on its own
Foreign stock sales can create demand for dollars when investors convert proceeds out of won. But equity transactions are only one part of the foreign-exchange market.
Exporters receive dollars from overseas customers. When those dollars are exchanged for won, the resulting supply can offset demand from investors exiting local assets.
South Korea currently has an unusually strong source of foreign-currency earnings.
The Bank of Korea reported a current-account surplus of USD 46.11 billion in August, supported by strong goods exports. Its October foreign-exchange review also pointed to increased dollar selling by exporters as a factor behind the won’s appreciation.
That does not mean foreign capital has stopped leaving Korea.
Bank of Korea data show that foreign portfolio investment recorded a net outflow of USD 19.97 billion in September, including USD 14.16 billion from equities and USD 5.81 billion from bonds.
The distinction matters: Korea can experience genuine portfolio outflows while its currency strengthens because other foreign-exchange flows are moving in the opposite direction.
A current-account surplus is not automatically converted into won, and the precise contribution of each flow cannot be inferred from stock-market selling figures alone.
The stronger won is evidence of currency-market resilience, not proof that foreign investors are accumulating Korean equities.
The same semiconductor export boom supporting Korea’s external accounts can coexist with falling chip stocks if investors are questioning future AI spending, profit margins, or valuations.
This is a divergence between realized export earnings and the price investors are willing to pay for future corporate profits.
The bullish signal would be a stronger won accompanied by sustained foreign buying and stabilizing earnings expectations. That combination has yet to be established.