[US Presidential Election and KOSPI]② Industries with Diverging Fortunes Depending on Election Results

Secondary Battery Declines While Oil Companies Thrive
US Presidential Election Results, Limited Impact Seen on Domestic Stock Market
Caution Advised for Trump Beneficiary Stocks

The stock prices of various industries are expected to diverge depending on the outcome of the U.S. presidential election. Currently, the U.S. presidential race is being reshaped early on into a 'rematch' between President Joe Biden and former President Donald Trump. Accordingly, the domestic securities industry predicts that industries with clearly opposing stances on either side will be affected depending on the election results.

Hwang Junho, a researcher at Sangsangin Securities, said, "Sectors with opposing views on both sides, such as themes related to Ukraine reconstruction, renewable energy, oil, and secondary batteries, may see increased movement depending on the election outcome," adding, "While these are not absolute factors affecting stock prices, they could act as downward pressure on stock prices." However, some caution that it is premature to predict stock trends by dividing industries into beneficiaries and victims when the binary contest is not yet finalized, advising careful investment in related thematic stocks.

Trump's Pledge to Repeal the IRA... Aftershocks on Electric Vehicles and Secondary Batteries

The sector expected to experience the greatest aftershock from the U.S. presidential election is electric vehicles and secondary battery stocks. Former President Trump pledged to repeal the Inflation Reduction Act (IRA), a core part of Bidenomics. The IRA includes provisions such as subsidies (tax benefits) for electric vehicles finally assembled in North America. Although it is difficult to repeal the IRA, which is already significantly underway, modifications to the subsidy-related provisions are anticipated. If this happens, domestic companies that have built electric vehicle battery factories in the U.S. to receive subsidies will inevitably suffer damage. Considering that the rally of secondary battery stocks, which led the domestic stock market last year, was highlighted as beneficiaries of the IRA, the secondary battery sector's stock prices are expected to be most affected.

Moon Namjung, a researcher at Daishin Securities, said, "If Trump is elected, the existing Biden administration's eco-friendly subsidy policies may be reduced, which would negatively impact stock prices related to the renewable energy sector," adding, "Expectations for eco-friendly industries such as electric vehicles and secondary batteries will also diminish, affecting stock prices."

There is also a counterargument that a clear correlation between Trump's administration and renewable energy stock prices has not been confirmed. Han Byunghwa, senior researcher at Eugene Investment & Securities, said, "The prediction that wind and solar power would be hit if Trump became president is completely untrue. This was already proven during Trump's administration," adding, "Rather, in 2019, Trump pressured for interest rate cuts, and from that time, stock prices of renewable energy-related companies began to rise."

Since repealing the IRA is practically impossible, some believe that when stock prices fluctuate due to Trump risk, it is a buying opportunity. Senior researcher Han Byunghwa said, "Stock price drops caused by Trump's tantrums are buying opportunities," adding, "Last November, the Financial Times reported that Trump planned to repeal the IRA if re-elected, but a full nullification of the IRA is practically impossible, and even if Trump mentions repealing the IRA, it cannot be legally achieved."

If Trump returns to the presidency, sectors expected to benefit include fossil fuel-related energy sectors such as oil and coal. The shale gas industry is also expected to benefit. Researcher Hwang Junho said, "Former President Trump emphasized U.S. energy independence and pledged to promote drilling and development of shale gas and natural gas, as well as to repeal related regulations," adding, "This will be seen as a positive for the shale gas industry, which faced limited extraction due to various regulations during the Biden administration."

Biden's Beneficiary Sectors Are 'Renewable Energy and Electric Vehicles'

The story changes if President Biden wins re-election. Industries expected to be hit by Trump's return to power become beneficiary sectors instead. Since President Biden advocates free trade, it is anticipated that renewable energy and electric vehicle sectors could benefit. The U.S. Democratic Party actively promotes industries such as electric vehicles, solar power, and wind power to expand exports.

Meanwhile, there is also a view that the impact of the U.S. presidential election results on the domestic stock market may be limited. Kim Jihyun, a researcher at Kiwoom Securities, said, "The world, including the U.S., has experienced both Trump and Biden as presidents and can predict what policies they have implemented and will pursue," adding, "Stock price movements related to beneficiary and victim sectors are unlikely to be significant depending on the election results."

There is also advice to be cautious when buying beneficiary stocks, as stock price movements related to pledges have been short-lived. Park Hyeran, a researcher at Samsung Securities, said, "Currently, Trump's industrial policy pledges include traditional energy infrastructure such as thermal power and coal, reconstruction of the traditional automobile industry's Rust Belt, and healthcare (drug price reduction)," adding, "However, in most cases, stock price movements related to these pledges were short-lived or inconsistent, so caution is needed when playing Trump-related beneficiary stocks."