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"Banks Achieve Unprecedented Foreign Exchange Trading Milestone, Surpassing $69.37 Billion"

According to the Bank of Korea (BOK), the second quarter of this year saw a historic surge in daily average foreign exchange trading volume for foreign exchange banks. The volume amounted to $69.37 billion, a 3.8% increase compared to the previous quarter and the highest volume recorded in 15 years. The increase in foreign investment in domestic securities and the stabilization of the exchange rate between the Korean won and the US dollar were cited as the reasons for the surge. Interbank transactions were the primary driver of this growth, accounting for the largest share of foreign exchange trading.

The breakdown of foreign exchange trading showed that spot exchange trading volume rose by 7.6% to $28.47 billion, while foreign exchange derivative trading volume increased by 1.3% to $40.9 billion. Within the spot exchange segment, won-dollar trading experienced a remarkable 5.3% rise within a month, totaling $19.9 billion. Interbank transactions among foreign exchange banks accounted for the largest share of foreign exchange trading, totaling $15.21 billion with a growth rate of 13.5%. Domestic customer transactions amounted to $7.72 billion, while non-resident transactions stood at $5.54 billion.

In terms of derivatives, futures exchange trading decreased by 5.7% compared to the previous quarter, primarily driven by non-resident non-deliverable forwards trading. On the other hand, foreign exchange swap trading increased by 5.2%, primarily driven by interbank transactions among foreign exchange banks. The trading volume for domestic bank trading surged by 8.6% to $31.57 billion, while foreign bank branches in Korea recorded $37.79 billion in trading volume, indicating a slight increase of 0.1%.

POSCO Future M, a company in the basic materials industry, recently saw an increase in mid/long-term supply contracts. As a result, their 2030 capacity and earnings forecasts are being revised up. The change in valuation method from EV/EBITDA to a discounted cash flow (DCF) valuation method reflects this change in the company's business environment. The DCF valuation method assumes a cost of equity of 11.9%, a cost of debt of 3.5%, a weighted average cost of capital of 6.6%, and a perpetual growth rate of 1.0%. This results in a fair market cap of W44tn and a target price of W560,000. The company's 2Q23 review showed sluggish cathode materials shipments but a recovery in the basic materials business.


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