[Good Morning Stock Market] "US Presidential Race Begins... Need for Differentiated Investment Strategies Based on Polling Changes"

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[Asia Economy Reporter Eunmo Koo] This year is a U.S. presidential election year. The Democratic and Republican parties hold opposing views on environmental issues, healthcare, corporate policies, and financial policies. However, there is consensus on protectionist trade policies against China, and both sides agree on the necessity of infrastructure investment.

Therefore, it is necessary to explore investment strategy ideas based on changes in approval ratings related to corporate or environmental policies where differences exist between the two parties during the election process. If the Democratic candidates' approval ratings rise, interest in eco-friendly themes may increase; conversely, if Republican President Donald Trump's approval rating rises, attention to the IT sector and growth-style stocks may increase.

◆Byunghyun Cho, Researcher at Yuanta Securities=2020 is a U.S. presidential election year. The Republican candidate is virtually confirmed as President Donald Trump, but the Democrats must select their final candidate through primaries. The Democratic race officially began with the Iowa caucus on the 3rd and the New Hampshire primary on the 11th.

Since the general election is a contest between the Democrats and Republicans, it is necessary to compare the policy differences between the two parties. It is true that the Democrats and Republicans have policy disagreements in many areas. In particular, they hold opposite positions on environmental issues, healthcare, taxation, and financial regulation.

However, there are also unexpected commonalities. First, both parties agree that roads, airports, and other infrastructure in the U.S. face serious aging problems and recognize the need for large-scale fiscal spending to address this. In fact, until May last year, the leadership of both parties reached a broad agreement on infrastructure investment at the $2 trillion level. Meanwhile, although their approaches differ, both parties share a similar direction regarding the need for trade policies to protect American workers and farmers.

Regarding the differences between the two parties, there is a likelihood that investment ideas should differ depending on changes in approval ratings during the election process. If the Democratic candidates' approval ratings rise, interest in eco-friendly themes is likely to increase relatively. Conversely, if Trump's approval rating rises, expectations for smooth corporate activities of major IT companies may lead to increased interest in the IT sector and growth-style stocks.

◆Yeeun Kim, Researcher at IBK Investment & Securities=IT is still expected to lead stock price increases. Given the improvement in earnings and ongoing momentum in the industry, IT is expected to drive index gains, with the index rising about 5% in the 12-month forward earnings per share (EPS) and reaching around 2390 points, which corresponds to a 12-month forward price-to-earnings ratio (PER) of about 12, playing a leading role.

For further index gains, a reflation trade environment must be established. That is, infrastructure investment through fiscal policy, rising commodity prices, and consequent inflation should accompany increases in cyclicals such as materials and industrials, which is expected to create an additional upward trend.

The semiconductor-centered market trend is expected to continue. Currently, the semiconductor sector has the highest market capitalization and operating profit weight in the KOSPI, so its impact on the index is inevitably significant. As earnings improve, the KOSPI's 12-month forward EPS has also rebounded. With an expected improvement in the semiconductor industry this year, a positive impact on the stock market is anticipated. We maintain a positive view on the sector overall due to proactive capital investment and equipment replacement demand driven by the advent of the 4th industrial revolution, recovery in demand, and rising product prices.