Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
How US election will affect investors' portfolio
This combination of file pictures created Sept. 29 shows Democratic presidential candidate and former U.S. Vice President Joe Biden, and U.S. President Donald Trump speaking during the first presidential debate at the Case Western Reserve University and Cleveland Clinic in Cleveland, Ohio. AFP-Yonhap
By Kim Bo-eun
By Kim Bo-eun
Investors have less than a month left to possibly readjust their portfolios before the results of the U.S. presidential election, as some of them think the outcome will have a big impact on the markets.
Analysts note that stock markets don't like “uncertainty,” and given President Donald Trump's repeated and continued confrontation with China, if he is reelected, they believe shares related to defense, AI, memory chips and fifth generation (5G) networks will get upside momentum.
On the flip side, a Joe Biden win would lead to investments in infrastructure, especially for renewable energy, based on Biden's election pledges. He has vowed to invest $2 trillion in clean energy and infrastructure.
“Stocks related to renewable energy and the environment will benefit, including those related to secondary batteries ― the stock market is already seeing such movements," said Lee Chang-mok, NH Investment & Securities' head of research. “If Biden takes office, the U.S. will likely seek to improve ties with China, which would make investments in the Chinese market more attractive.”
Among large-cap companies, LG Chem, SK Innovation, Hyosung Group and Hyundai Motor are considered as main beneficiaries if Biden takes the Oval Office.
But the analyst noted that the outcome of the senatorial elections could act as a “variable,” as Republicans controlling the Senate would put the brakes on the Biden administration's moves.
The re-election of Trump would likely help tech stocks because he is better known for being pro-business and supporting tax cuts, according to some analysts. South Korea's main technology companies including Samsung, LG and SK affiliates would be poised to do “quite well.”
China is being accused of stealing core technologies owned by U.S. companies in AI and 5G, as Trump has been punishing Huawei and TikTok over their alleged stealing of consumer data that could be used by the authorities in Beijing.
Seo Sang-young, an analyst at Kiwoom Securities, said, “If Biden is elected and Democrats secure a majority in the House and Senate, the administration will gain traction to reinforce Obamacare, and healthcare-related stocks will benefit.”
If Biden or Trump do not see their parties take control of Congress, the execution of another relief package is expected to slow down. “This could lead to a further economic slowdown, in which case stocks that are not affected by macroeconomic conditions would be attractive,” Seo said. These include stocks in electricity, gas and railways.
Biden is favored to become the next U.S. leader as predictions from U.S. media outlets were giving Trump a less than 20 percent chance of winning, and major betting sites are also giving the Democrats strong “odds” to sweep or gain a majority in the Senate.
Whatever the scenario, portfolio managers said the Korean stock market is still compelling as it is still one of the cheapest in Asia. MSCI Korea's forward price-to-earnings was below 10 times compared with the MSCI Asia Japan at 14. Listed companies are seeing gradual signs of recovery both in terms of profits and revenue. Also, muted North Korean provocations are providing a positive impetus for the markets.
Major investment bank UBS advised investors recently to ask whether investment allocations match “specific conditions.”
“The election outcome is still uncertain and positioning a portfolio right now for a specific outcome leaves it vulnerable to the good chance that another outcome, with different market consequences, materializes,” UBS wrote recently.