[US Midterm Elections] Republicans Narrowly Win in Tight Race... "Expect Benefits for Semiconductor and Defense Industries"

Prospects of Halt in Eco-Friendly Energy Policies
Investment Needed in Overlapping Areas of Both Parties' Policies

[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Myunghwan] As the Republican Party is expected to secure a narrow victory in the U.S. midterm elections, securities firms foresee positive impacts on semiconductor and defense-related stocks. This is because these industries share common policy views with the Democratic Party, despite the Republicans not achieving a landslide win.

On the 10th, local media including NBC reported that in the U.S. midterm elections held on the 8th (local time), the Republican Party is expected to hold 219 of the 435 seats in the House of Representatives, while the Democratic Party is expected to hold 216 seats.

With the Republicans gaining the majority in the House, the Democratic Party’s policy initiatives are likely to face obstacles. The Republicans have expressed opposition to Democratic-led policies such as green energy and minimum tax rates. The GOP is known to support traditional energy sources like thermal power and nuclear power instead of green energy such as solar and wind power. Accordingly, securities firms anticipate that traditional energy sectors like oil and natural gas, as well as hydropower, could benefit. There is also analysis that global multinational companies in IT and pharmaceuticals, which have accounting profits exceeding $100 million, could benefit as the Republicans, opposing tax hikes, may push to abolish the 15% minimum tax rate.

Since the differences between the two major parties are not significant, there is advice to invest in sectors like semiconductors and defense, where both parties share common ground. Samsung Securities researcher Park Hyeran stated, "Investment in bipartisan issues agreed upon by both the Republican and Democratic parties, such as defense, aviation, and semiconductors, could be an alternative." Hyundai Motor Securities researcher Lee Jaeseon also advised, "The common voices of both parties are energy independence and national security," adding, "Related sectors include capital goods (defense, shipbuilding, machinery), semiconductors, and some secondary battery companies."

There is also cautious speculation about a possible market rebound following the conclusion of the midterm elections, based on past cases where the market often showed an upward trend after midterms. Kyobo Securities researcher Kang Minseok said, "In six cases, the U.S. stock market showed a favorable trend after midterm elections as political uncertainty disappeared," and added, "Not only will political uncertainty be resolved, but as in past cases, the increased influence of the pro-business Republican Party will have a positive impact on the stock market."

On the other hand, some analysts believe the impact of this election on the market will be limited. Heungkuk Securities researcher Lee Youngwon predicted, "Due to the limitations of midterm elections, the impact on the economy and market order after the election is likely to be limited, and future developments will not be significantly different."