[Weekly Market Outlook] Biden Administration Inaugurated on the 20th... Will the Correction Phase and Sentiment Change?

KB Securities, "Strong Market Maintained for One Month After US Presidential Inauguration"
Focus on Climate Change Response, Alliances, COVID-19 Measures, and Additional Stimulus

Attention Drawn Based on Which Campaign Promise Is First Signed as Executive Order
Potential for Sectoral Differentiation

[Asia Economy Reporter Oh Ju-yeon] With the inauguration of U.S. President Joe Biden scheduled for the 20th, attention is focused on whether the domestic and international stock markets will reflect expectations for the new administration's launch. Since policy implementation will begin in earnest after the inauguration, there is an analysis that although the January stock market has entered a correction phase, the biggest event is still ahead.

KB Securities noted that about a month after past U.S. presidential inaugurations, a bullish atmosphere was maintained in both the U.S. and Korean stock markets, suggesting that the strong market sentiment in January could continue. They also summarized four key areas of Biden administration policies to watch in the stock market: climate change response, relations with allied countries, COVID-19 response, and additional economic stimulus measures.

Among these, the most notable area is environmental policy. Biden stated during his presidential campaign that he would rejoin the Paris Climate Agreement, which President Donald Trump had announced withdrawal from in June 2017, and mentioned reintroducing environmental policies.

Ha In-hwan, a researcher at KB Securities, diagnosed that "the green energy sector is expected to gain attention due to the Biden administration's climate change response." Following the U.S. presidential election, clean energy exchange-traded funds (ETFs) have significantly outperformed the market, indicating high expectations for green policies due to Biden's election. However, with the formal push for green policies such as rejoining the Paris Climate Agreement after the inauguration, interest in the green market is expected to continue.

Regarding relations with allied countries, it is expected that sanctions against China will continue. The method of sanctions is likely to shift from existing tariffs to pressure on technology, which is judged to be a positive factor for the Korean stock market in the long term as a reflected beneficiary.

Additionally, Biden's proactive COVID-19 response is expected to raise hopes for economic normalization, and if discussions on additional economic stimulus measures accelerate following Biden's inauguration, stocks benefiting from economic recovery are expected to attract attention. KB Securities recommended increasing interest in the chemical and financial (insurance) sectors.

However, caution is advised starting from late February, which corresponds to 30 days after the U.S. presidential inauguration.

Researcher Ha said, "In January, it is necessary to focus on the 'one more chance' remaining from the U.S. presidential election," but added, "Afterwards, events that could cause adjustments, such as the resumption of domestic short selling, are also pending, so caution is required."

SK Securities focused on the areas where the Biden administration is expected to sign executive orders first among various campaign promises.

They explained that if Biden signs the rejoining of the Paris Climate Agreement, interest in green-related stocks will continue; if he signs COVID-19 response measures, expectations for the resumption of economic activities will rise; and if he signs restoration of relations with allied countries, foreign interest in the domestic stock market could be revived, making the first executive order noteworthy.

Han Dae-hoon, a researcher at SK Securities, said, "After many twists and turns, once the Biden administration officially launches, political uncertainty is expected to be completely resolved," adding, "With the realization of the Blue Wave in the U.S., policy implementation has accelerated, and expectations for active stimulus measures have increased, stimulating inflation and causing government bond yields to rise."

Han predicted, "Depending on the scale and details of the stimulus package and the first executive order signed by the Biden administration, sectoral differentiation is expected to become clear."

He continued, "It is necessary to pay attention to green sectors, financial stocks benefiting from rising interest rates, infrastructure-related sectors due to expectations of expanded infrastructure investment, and cyclical sectors depending on the scale of the stimulus package."