Foreign Shareholders about to Send Dividends to Home Countries
Much attention is being paid to how the seasonal factor of large-scale dividend remittance by foreigners will affect South Korea’s current account balance and foreign exchange rate.
On April 12, the won-dollar exchange rate rose 3.7 won to close at 1,124.9 won per U.S. dollar. The rate rose for the third consecutive day with foreign shareholders in companies with a December fiscal year-end about to send their dividends to their home countries.
According to financial data provider FnGuide, their cash dividends for the latest fiscal year are estimated to have increased by approximately 40 percent based on an increased payout ratio. Especially, those from Samsung Electronics soared as a result of its special dividend payment of 1,578 won per share. The total dividend from the company is 13,124.3 billion won and foreign shareholders’ amounts to 7,743 billion won. For reference, the latter was 1.44 trillion won one year ago.
In addition, foreign shareholders’ dividend in 15 major companies amounts to four trillion won or so, including 480.6 billion won in KB Financial Group and 423.2 billion won in SK hynix. An upward pressure on the won-dollar exchange rate is inevitable in the event of a large-scale exchange.
South Korea’s April exchange rate rose for the fourth consecutive year until 2020. In April 2019, the rate jumped 3 percent to 1,168.2 won per U.S. dollar. In April last year, the rate did not change that much because it soared to 1,285.7 won in March due to the outbreak of COVID-19 and then South Korea concluded a currency swap agreement with the United States.
Recently, foreign investors sold a lot of stocks in the South Korean market for two sessions in a row after their net buying that started this month. Meanwhile, South Korea’s increasing exports are defending the value of its currency. The value of the U.S. dollar is showing little change as a rise in U.S. Treasury yields is slowing down.
South Korea posted a current account deficit in both April 2019 and April 2020 due to a rapid increase in dividend payment. In April 2019, the dividend deficit soared to US$4,531.2 million to result in the first current account deficit in seven years. In April last year, the dividend deficit dropped to US$3,014.2 million and the goods account surplus also dropped to result in a large current account deficit.