Trump Era Seoul stocks tumble on Trump win

Currency traders work at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, Wednesday. Donald Trump’s victory in the U.S. presidential election jolted markets around the world Wednesday as investors panicked over uncertainties on trade and geopolitical tensions. The benchmark KOSPI lost more than 2 percent. / Yonhap

By Nam Hyun-woo

Seoul stocks plunged Wednesday as investors dumped stocks on concerns about the fallout of Donald Trump’s U.S. presidency on the Korean economy and heightening external uncertainties, dealers said.

Markets had opened solidly higher with the prospect of a win by Hillary Clinton, but quickly shed those gains as odds began leaning toward Trump.

As investors unloaded shares, the benchmark KOSPI closed down 2.25 percent at 1,958.38 points. At one point in the day, the index retreated to as low as 1,931.07. The secondary KOSDAQ also shed a whopping 3.92 percent to close at 599.73.

The won closed sharply lower on stronger dollar sentiment, with the local currency closing at 1,149.5 won per dollar, losing 14.5 won from 1,135.0 won, after showing extreme fluctuations throughout the day.

Analysts said that the steep fall reflects investors’ concerns that the U.S. government under Trump leadership will strengthen protectionism, adversely affecting global trade and heightening market uncertainties.

“Markets were moving in line with expectations of a Clinton win earlier in the session, but investors rushed to sell stocks toward the close as Trump pulled off an upset victory, which raised uncertainties for the markets,” said Ha Keon-hyeong, an economist from Shinhan Investment.

“Clinton’s policies are in an extent of existing Democratic Party policies, but that of Trump are completely new and relatively unorganized. Also, his America First approach has made investors that the U.S. will be more focused on its own interests.”

Despite the turmoil on the Korean market on Wednesday, Ha said Trump’s victory will not be negative to the local market in a long-term perspective.

“Though a quick rebound is not likely, Trump’s policy is based on fiscal expansion and gentle key rate hike ― though he criticized Federal Reserve Chair Janet Yellen. So Trump’s presidency will not be as negative as it is concerned now,” he said.

Individual and foreign investors unloaded a massive volume of stocks, selling 126.5 billion won and 214.2 billion won, respectively. Institutional investors went on a buying spree, purchasing stocks worth 309.9 billion won.

Most large-cap stocks also failed to evade the nosedive. Samsung Electronics lost 2.92 percent to close at 1,596,000 won and Hyundai Motor fell 3.25 percent to 134,000 won.

On the other hand, a number of defense industry stocks rallied as a Trump win loomed. Trump has been vocal on defense burden sharing, including Korea in a group of what he considers free-riding allies, unwilling to contribute more to their own defense.

As the Trump victory created massive uncertainty for investors, so-called safe-haven assets experienced a rise. The gold price on the Korea Exchange (KRX) traded at 49,656.49 won per gram as of 2:30 p.m., up 5.82 percent from the previous session. The rise was the sharpest since July 6, when the price hit a record high of 50,910 won amid the fallout from Brexit.

“As you have seen today, there were extreme preferences in safe assets and avoidance in risk assets,” said Lim Dong-min, an economist at Kyobo Securities. “As a candidate, Trump’s pledges were disorganized so far. When he becomes the president, those policies may be organized, but until then, this kind of extreme uncertainty will continue.”

“Trade protectionism will likely be strengthened down the road,” said an analyst at Hana Financial Investment. “The risk-off trend will likely continue as geopolitical risks and political uncertainty rise.”

In a follow up, the KRX held an emergency meeting to discuss ways to stabilize the local market. The financial authorities also held a series of meetings to come up with measures following the unexpected election result. The Ministry of Strategy and Finance and the Financial Supervisory Service each convened meetings to talk about measures to brace for the impact.