Hanwha Ocean Sells USD 2B Forward Contracts, Raises Hedging Above 70%

Hanwha Ocean sold USD 2 billion in forward exchange contracts on July 10, marking a strategic shift to increase its currency hedging ratio above 70%. The South Korean shipbuilder, which previously maintained an essentially open foreign exchange position, began raising its hedging ratio last month and continued the adjustment in July. The move comes as the company changes direction from its prior FX-open strategy amid a broader market environment where SK Hynix's American Depositary Receipt (ADR) listing is set to release substantial dollar funds into the foreign exchange market.

Hanwha Ocean Executes USD 2 Billion Forward Contract Sale

Hanwha Ocean conducted the forward exchange contract sales through two to three domestic banks and foreign banks on July 10, according to the Seoul foreign exchange market. The company plans to execute additional forward sales next week. The transactions represent a continuation of hedging ratio increases that began last month, with the company now targeting a hedging ratio exceeding 70%.

Forward Sales Drive USD-KRW Exchange Rate Lower

The USD-KRW exchange rate faced downward pressure during trading following Hanwha Ocean's forward contract sales. The exchange rate dropped to 1,499.30 won at approximately 3:19 PM before partially recovering to close the Seoul trading session at 1,501.40 won. The combination of heavy industry forward sales and incoming dollar funds from SK Hynix's ADR listing is applying downward pressure on the USD-KRW rate.

Korea-US Investment Act Supports Shipbuilding Cooperation

The National Assembly passed the Korea-US Strategic Investment Special Act on March 12 in a plenary session. The legislation establishes a separate Korea-US Strategic Investment Corporation to implement a Memorandum of Understanding (MOU) for USD 350 billion in US investments. Shipbuilding cooperation represents the largest investment proportion within this framework.

FAQ

What did Hanwha Ocean do on July 10?

Hanwha Ocean sold USD 2 billion in forward exchange contracts on July 10 through domestic and foreign banks, raising its currency hedging ratio above 70% from a previously open foreign exchange position.

How did Hanwha Ocean's forward sales affect the USD-KRW exchange rate?

The USD-KRW exchange rate fell to 1,499.30 won during trading on July 10 following Hanwha Ocean's forward contract sales, before closing at 1,501.40 won in the Seoul session.

What is the Korea-US Strategic Investment Special Act?

The Korea-US Strategic Investment Special Act, passed by the National Assembly on March 12, establishes a Korea-US Strategic Investment Corporation to implement a USD 350 billion investment MOU, with shipbuilding cooperation holding the largest investment share.