Stock markets' uncertainty over U.S. election cleared

By Anna J. Park

With Joe Biden's projected election win for the presidency, eyes are now on how the news will affect Korean stock markets and the foreign currency market.

The U.S. stock market has been on an upward trend during the past week, with the Nasdaq index going by 7.9 percent during the past five trading sessions from 11,020.90 at last Monday's closing to 11,895.23 at Friday's market closing. The Dow Jones index also rose by 6.1 percent during the past week, from 26,691.28 at last Monday's closing to 28,323.40 at Friday's closing. Korea's benchmark KOSPI also rose by 6.1 percent during the past week, ending at 2,416.50 by Friday's closing.

Market experts see that short-term political turmoil could be amplified by lawsuits on election vote counting, yet the impact on the local stock market is expected to be limited as market uncertainties over the election results have largely been cleared.

“Market investors are paying relatively more attention to the fact that uncertainties over the next U.S. administration have been cleared away, rather than on remaining as unfavorable market conditions,” said Seo Jung-hoon, an analyst at Samsung Securities, explaining that foreign investors have become active on the local stock markets as they can find strategies based on the election results.

Yet some market watchers also called for caution, stressing that expectations on the election results' positive impact have been pre-reflected in the markets, and now is the time to refocus on economic fundamentals and the possibility for supplementary fiscal measures.

“So far, market expectations regarding the U.S. presidential election have mostly been positively reflected in the market index. Thus, no more major impacts are expected to come from the election,” Seo Sang-young, an analyst from Kiwoom Securities, told The Korea Times.

“Now investors will closely look into companies' fundamentals as well as ever-increasing pandemic patients in both the U.S. and Europe. As Biden is expected to form a coronavirus taskforce soon to actively combat the pandemic, it could also raise market volatility over what kinds of measures would be taken.”

Meanwhile, as Biden is expected to set out global trade policies based on multilateralism, the won's recent appreciation could continue for a while. Won-dollar exchange rates ended at 1,120.4 at Friday's closing, down by 7.8 won from the previous session. It was the lowest won-dollar exchange rate since February last year.

“As the Biden administration is expected to expand fiscal spending as well as ease monetary policies, most major countries' economies will see a rebound along with the U.S. economy; this will make the greenback's unilateral strengthening unlikely,” said Yoo Seung-min, global investment analyst at Samsung Securities.

“A further U.S. economic stimulus package will be passed, even if the Republicans take over the Senate. The currency increase rate in the U.S. is still overwhelming that of eurozone countries, continuing to create an environment for the dollar's weakening. Also, the strengthening of the won and the yuan are likely to continue as the numbers of COVID-19 patients in Korea and China are much lower than that of the U.S.,” Ha In-whan, an analyst at KB Securities, pointed out.