Nomura: Won and Taiwan dollar more vulnerable to tech-stock pullbacks; tactical long EUR/KRW

Why are the won and Taiwan dollar more vulnerable to tech-stock declines?

At the end of October 2026, foreign investors held about 1.43 trillion in Korean equities, equivalent to 3.4 times the country’s foreign-exchange reserves; in Taiwan, the figure was about 2.3 trillion, equivalent to 3.8 times its reserves. If weakness in tech stocks prompts foreign investors to reduce their holdings, the resulting outflows could pressure both currencies.
Foreign ownership as a share of total market capitalization remains high, but has fallen from recent peaks: in Korea, from 39.1% in June 2026 to 37.1% in October; in Taiwan, from 47.5% in 4–May to 46.4% in October. Thus, the vulnerability stems more from the still-large base of foreign holdings than from the ownership share continuing to reach new highs.

Nomura includes in its risk scenario a reduction in exporters’ dollar repatriation and an increase in importers’ dollar demand: the former reduces foreign-exchange supply, while the latter increases demand for dollars. After adjusting the assumptions with reference to China from May 2022 through the end of 2023, Korea’s basic balance surplus falls from the reported 28.8 billion to 8.7 billion.
This is not a change in capital flows that has already occurred, but a scenario used to estimate the capacity to absorb shocks. If corporate dollar hoarding and foreign-investor withdrawals occur at the same time, reduced foreign-exchange inflows from export trade would make it harder for the basic balance surplus to offset equity outflows.

A more extreme simulation projects net outflows from Taiwan and Korea equivalent to 13.5% and 7.8% of their reserves, respectively, based on the average decline in foreign equity liabilities during the global financial crisis and the U.S. tapering shock. A milder scenario uses the average of the decline during the tapering shock and one-quarter of the decline during the global financial crisis; the corresponding proportions for Taiwan, Indonesia and Korea are 6.3%, 4.6% and 2.0%.
The results are not determined solely by the scale of foreign holdings: in the milder scenario, Indonesia’s reserve impact ratio is higher than Korea’s, reflecting that each market’s adjusted basic balance and reserve size also affect its ability to withstand pressure.

Nomura established a 3/5 tactical long position in EUR/KRW, with a target of 1580 and estimated potential of about 4% over two months. A rebound in tech stocks that lifts the Korea Composite Stock Price Index, or a slowdown in foreign equity outflows from Korea, could strengthen the won and weigh on the trade.
Even if tech stocks remain under pressure, the won’s performance relative to the euro may also be affected by foreign-exchange accumulation by the Bank of Korea, household purchases of U.S. stocks and institutions’ overseas allocations. The Bank of Korea accumulated foreign exchange at an average monthly pace of about 6 billion through the three months up to October; Korean retail investors’ flows into U.S. stocks in October totaled 6.9 billion. Nomura also lists increased overseas allocations by the National Pension Service and Korea’s investment plan in the United States as factors that could limit significant won outperformance.