A Neck-and-Neck Presidential Election, Tech Stocks Revive in US Markets and Korean Green Stocks Rebound

As Biden's Election Chances Rise, Industry Sentiments Diverge
Plunged Eco-Friendly Stocks Rebound
USD-KRW Exchange Rate Stabilizes Around 1120 Won

[Asia Economy reporters Seulgina Jo and Juyoun Oh] As the vote counting for the U.S. presidential election progressed, the momentum that had been leaning toward President Donald Trump shifted to Democratic candidate Joe Biden, causing mixed reactions across domestic and international stock markets by sector. In particular, technology stocks surged in the U.S. stock market, driving index gains. In the domestic stock market, eco-friendly and bio sectors showed strength.

According to the Korea Exchange on the 5th, as of 9:20 a.m., the KOSPI index rose 1.41% from the previous trading day to 2,390.55, and the KOSDAQ index increased 1.39% to 838.45. Among the top 10 market capitalization stocks, all except NAVER rose. Samsung Electronics (1.71%), SK Hynix (1.80%), as well as secondary battery-related stocks such as LG Chem (2.15%) and Samsung SDI (3.70%) increased, and bio-related stocks like Samsung Biologics (6.96%) and Celltrion (0.74%) also rose.

Eco-friendly stocks, considered beneficiaries of Biden, made a spectacular comeback. Hanwha Solutions surged intraday by 10.42% to 47,150 KRW. Although it had plunged 11.85% to 41,300 KRW the previous day on news favoring Trump, it recovered much of the loss. CS Wind (7.90%), Sinsung ENG (7.61%), and OCI (6.03%) also rose.

On the other hand, stocks related to inter-Korean cooperation and rare earth elements, which attract attention amid escalating U.S.-China disputes, fell sharply. Ananti, which had risen 10.85% intraday the previous day, dropped 7.87% on this day, while Union and Union Materials plunged 19% and 17%, respectively. These were stocks that had surged 27-29% intraday the day before.

In the overnight New York stock market, with growing confidence in Biden’s victory, the Dow Jones Industrial Average rose 1.34% to 27,847.66, and the S&P 500 index closed up 2.20% at 3,443.44. Particularly, the tech-heavy Nasdaq index surged 3.85% to 11,590.78. The surge in tech stocks is analyzed to be due to the Republican Party maintaining control of the Senate, which removed the Blue Wave scenario from the election outlook. This created a structure where it would be difficult to enforce strict regulations on IT companies even if Biden were elected.

With the Republican Party expected to maintain a Senate majority, demand for government bonds also expanded. In the New York bond market that day, the benchmark 10-year U.S. Treasury yield fell 12.5 basis points (1bp=0.01 percentage point) to 0.773%. Until the previous day, the 10-year yield had surged to around 0.9%, the highest since June, on expectations that the Democrats would push for large-scale economic stimulus under the Blue Wave scenario.

Along with the decline in bond yields, major banks’ stock prices also plunged 3-5%. Some regional banks experienced nearly a 10% drop. Gold futures fell for the first time in four trading days. Selling pressure intensified, and December contracts traded at $1,896.2 per ounce, down 0.7% from the previous day. On the New York Mercantile Exchange (NYMEX), December delivery West Texas Intermediate (WTI) crude oil rose 3.96% to $39.15 per barrel.

The won-dollar exchange rate sharply reversed to a decline after one day. In the Seoul foreign exchange market that day, the won-dollar rate opened at 1,130.0 KRW, down 7.7 KRW from the previous day, and fell to 1,128.3 KRW. The rate dropping to the 1,120 KRW level was the first since the 27th of last month. This is interpreted as reflecting increased expectations of a weaker dollar as Biden’s chances of winning rose.

Meanwhile, in the domestic financial and foreign exchange markets, it was assessed that the possibility of increased volatility due to the U.S. presidential election would be limited. Kim Yong-beom, First Vice Minister of Strategy and Finance, chaired a macroeconomic and financial meeting at the Korea Development Bank headquarters that day and said, "The U.S. election risk has been largely priced into our financial markets, and the broad framework of the U.S.’s accommodative monetary and fiscal policies will be maintained." He added, "Major stock markets in the U.S., Europe, and Asia closed higher, showing relatively stable conditions compared to past U.S. elections. Since the market’s general view is that efforts will be made to quickly reach an additional economic stimulus package after the winner is confirmed, it is a time for calm response."