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Many companies who bought forex hedge funds are on the verge of going bankrupt as a result of the plunging won. Many who bought Knock-in Knock-out (KIKO) option trading, which protects customers¡¯ money when the exchange rate fluctuates within a certain range, have suffered losses of several billion won after the Korean currency plunged beyond the range.
According to the Financial Supervisory Service, there are 519 companies on KIKO trading as of the first half of this year, and their total losses amount to W1.478 trillion (US$1 = W1,119). ¡°As the won dropped further in recent days, it generated an additional loss of some W400 billion. The total loss this year will tally up to W2 trillion at this point,¡± said Kang Nam-hoon, head of the external cooperation affairs division at the Korean Federation of Small and Medium Businesses, on Wednesday.
Concerns about a liquidity crisis among small and medium-sized businesses are becoming a reality. Kosdaq-listed LCD TV parts manufacturer Taesan LCD filed for protection on Wednesday. Until the reorganization process is over, transaction of the company¡¯s stocks and payment of debts will be suspended. Taesan LCD recorded W11.4 billion in operating profit in the first half of this year, but was hit hard by KIKO trading and sustained a loss of W80.64 billion in the same period.
(englishnews@chosun.com )
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