[Practical Finance] 2020 Year-End Stock Market at a Turning Point, Biden and Vaccine Beneficiary Stocks?

'Eco-friendly Stocks' or 'Cyclical Stocks'?
Solar Power and Renewable Energy, Secondary Battery Stocks Soar
Economic Recovery Optimism... Airlines, Hotels, Casinos See Brief Surge

[Asia Economy Reporter Oh Ju-yeon] At the end of 2020, the stock market reached a turning point. With Joe Biden, the Democratic candidate, winning the U.S. presidential election that attracted global investors' attention, the sectoral landscape for next year could change. Additionally, the COVID-19 issue, which had hindered stock market growth throughout the year, has entered a new phase with 'vaccine development,' causing the atmosphere around individual stocks to shift 180 degrees. Compared to the non-face-to-face (untact) related stocks that had risen amid repeated cycles of COVID-19 spread → easing → resurgence, face-to-face (contact) related stocks, which had been suppressed due to direct impact from COVID-19, are expected to receive more attention, prompting investors to already be busy searching for next year's leading stocks. Summarizing these trends, the leading stocks can be broadly divided into 'eco-friendly related stocks,' which benefit from policies, and 'cyclical stocks,' which are expected to recover with the economy.

◆Will the 'Eco-friendly Stock' Era Begin with the Biden Effect?= According to the Korea Exchange on the 11th, eco-friendly and renewable energy-related stocks have shown strength in the domestic stock market since the second half of this year. These sectors are expected to grow not only because they are considered beneficiaries of Biden in the U.S. election but also because starting next year, Korea's New Deal project will enter a new growth phase through institutional improvements and fiscal and private investments.

Hanwha Solutions, a leading solar energy company regarded as a 'Biden beneficiary,' saw its stock price rise from around 25,000 KRW in July to 54,000 KRW on the 10th, more than doubling. CS Wind, a manufacturer specializing in wind power towers, also classified as an eco-friendly stock, surged from 42,000 KRW to 136,000 KRW during the same period, tripling in value. Additionally, LS and LS ELECTRIC saw their stock prices rise over 50% as offshore wind power growth potential was highlighted, and companies like Sinsung ENG, Willings, and Hyundai Energy Solutions experienced single-day increases of up to 20% following Biden's victory.

Biden pledged to replace 3 million government vehicles annually with electric vehicles and achieve carbon neutrality by 2050, boosting secondary battery-related stocks. LG Chem surpassed 700,000 KRW after about two months since September 16, and Samsung SDI exceeded 500,000 KRW, hitting a 52-week high.

Some caution that with President Donald Trump contesting the election results and potential legal battles, relying solely on expectations for certain beneficiary sectors could be risky. However, these eco-friendly sectors are not just a Biden policy theme but are also linked to Korea's 'Green New Deal' project, which will be fully underway next year, making them worth considering from a mid- to long-term perspective.

Notably, 2021 and 2022 are expected to be the 'stepping stone' period for the Green New Deal, with a total investment of 72.4 trillion KRW. This scale is significantly larger compared to the Digital New Deal (58.2 trillion KRW) and safety net reinforcement (28.4 trillion KRW) within Korea's New Deal projects. Seochungwoo, a researcher at SK Securities, said, "Even after the U.S. election ends, Korea's New Deal project will see 114 trillion KRW in funding over five years until 2025, so these are not just simple themes or one-off issues, and there are ample opportunities for additional profits."

◆Return to Normal Life... Emphasis on Economic Recovery= Stock market investors are focusing on the fact that the disrupted daily life due to COVID-19 cannot continue indefinitely and are searching for stocks that could sharply rebound with economic recovery. This sentiment intensified after U.S. pharmaceutical company Pfizer announced on the 9th (local time) that its COVID-19 vaccine showed over 90% efficacy in interim results. Expectations that face-to-face activities like traveling and enjoying movies could become free again have brought attention to airline and hotel leisure-related stocks. Following Pfizer's vaccine announcement, these sectors surged sharply in the domestic stock market on the 10th, reflecting high investor interest. Airlines such as Korean Air and Asiana Airlines, as well as travel agencies like Hana Tour and Modetour, saw double-digit intraday gains, and duty-free shops like Hotel Shilla and Shinsegae, along with the three casinos Kangwon Land, GKL, and Paradise, also experienced significant stock price increases.

Vaccine development is also expected to impact previously suppressed cyclical stocks. As COVID-19 eases and economic recovery begins, traditional infrastructure-related stocks such as steel, chemicals, automobiles, and semiconductors could gain prominence. Especially under the upcoming Biden administration, fiscal spending is expected to expand more than during Trump's term, actively promoting economic stimulus through infrastructure, causing these sectors to already stir.

POSCO's stock price, which was around 180,000 KRW in September, has risen about 27%, approaching its yearly high of 240,000 KRW. Hyundai Steel's stock price has also trended upward with hydrogen car development expectations, rising over 60% from the early July level of 20,000 KRW to 32,000 KRW.

The petrochemical sector, which suffered due to COVID-19, is also considered a representative industry to watch during next year's economic recovery. Although it barely maintained operations this year by selling gloves and disinfectants related to COVID-19, from next year, improved demand, high operating rates, and rising oil prices are expected to significantly increase operating profits. Companies like Kumho Petrochemical and Lotte Chemical have been volatile, with daily fluctuations exceeding 10%.

Yoon Jae-sung, a researcher at Hana Financial Investment, said, "While demand for COVID-related products may weaken due to vaccine development, the recovery of underlying demand related to economic normalization will more than offset this. We expect a d?j? vu of 2009-2011 when product price increases outpaced raw material price increases."