With the strong performance of the dollar exchange rate, several segments of the global financial market are undergoing profound changes, especially those foreign export companies that rely heavily on the U.S. market, which are benefiting from the strengthening of the U.S. dollar, especially chip manufacturers in Asia and industrial and pharmaceutical companies in Europe.

According to Goldman Sachs, the share price of U.S. exports has already surpassed that of non-U.S. exports this year. This phenomenon was further explained by George Maris, Chief Global Investor at Principal Asset Management: “U.S. exports will not only benefit from exchange rates but will also benefit from trade advantages.”

In April 2024, the U.S. dollar’s rise to all major currencies was due to the strong performance of the U.S. economy, which delayed market expectations for the Federal Reserve’s rate cuts. Though global risky sentiment led to the shares of export companies being sold out, these companies could be at the forefront of any market rebound. Data show that Asian (excluding Japan) and European companies’ 12-month history of each share earnings often synchronize with the dollar trend.

For example, despite lowering the expectations for the expansion of the chip market, the company achieved its first profit growth in a year.Taiwan stock listed in Taiwan in China has risen by 32% since this year, while Taiwan’s benchmark index has risen only 12%.This performance highlights how Taipei as a US-exporting company uses exchange rate changes to boost its market competitiveness.

Morgan Stanley’s analysis also pointed out that Japan and China’s Taiwan stock markets could benefit from the strengthening of the U.S. dollar due to the relatively high share of overseas revenues of their component-stock companies.Many Japanese companies, including Toyota, Mitsubishi UFJ Financial Group and Inpex Corp, have a correlation of up to 0.8 over the exchange rate of the U.S. dollar against the yen.

In Europe, pharmaceutical and luxury companies may also benefit from the strengthening of the U.S. dollar. For example, Danish weight loss drug manufacturer Norwood Nord, whose production is concentrated in Europe, but the largest sales market is the U.S., so the strengthening of the U.S. dollar is a clear advantage for it.

British industrial companies such as Ashtead Group Plc and Rentokil Initial Plc, as well as the Dutch biotech company ArgenX SE, show similar trends, with at least 70% of their revenue coming from the United States, one of the main beneficiaries of the stronger dollar.

However, the strengthening of the dollar is not a general benefit to global markets. For every 1 percent increase in the dollar index, the monthly return rate of the MSCI stock index in all countries/regions except the U.S. usually drops by 0.2 percent. This suggests that when the dollar strengthens, money flows out of non-U.S. markets, which may lead to poor performance in cyclical industries such as basic resources, non-essential consumer goods and finance.