[Real Estate Tech] 'US Presidential Election' 4 Months Away... Winning Companies vs Losing Companies

Democrats vs Republicans: Stark Differences on 'IRA & Secondary Batteries'
Volatility Expected to Increase for Domestic Battery Companies
Solar & Wind vs Oil & Nuclear: Mixed Fortunes Depending on Administration
Defense & Cryptocurrency Favored More by Trump
'America First' Policy Continues... Semiconductor & Power Infrastructure Benefits Persist

With just over four months remaining until the U.S. presidential election, investors' attention is focused on setting directions for financial investments. As Democratic candidate President Joe Biden and Republican candidate former President Donald Trump sharply differ in their economic policies and industrial stances, ways to mitigate risks have also emerged as a major concern.

Democrats vs Republicans Clash Over ‘IRA Policy’

The policy area where the two camps most sharply diverge is the energy sector. While the Democratic administration emphasizes renewable energy, Trump has declared withdrawal from the Paris Agreement and is steering toward a return to traditional energy sources such as oil.

The Biden administration has strengthened carbon neutrality goals to address the climate crisis. After pushing the Better Build Back Act (BB) but failing to pass it due to Republican opposition, the bill was renamed the Inflation Reduction Act (IRA). The IRA is the core policy framework created by the Democrats to tackle climate change and rampant inflation.

Although Biden showed a lackluster performance in debates, leading to growing local calls to replace the Democratic presidential candidate, the major policy framework of the Democrats is likely to be maintained. Biden has supported industries preparing for the climate crisis, such as electric vehicles and eco-friendly energy, under the IRA.

In particular, if Biden succeeds in his re-election, the restructuring of the automobile industry centered on electric vehicles is expected to accelerate. Through the IRA enacted in August 2022, subsidies are being provided for electric vehicles and others until 2032. This year, automobile emission regulations were also finalized. The Biden administration plans to increase the share of electric vehicles among passenger cars sold in the U.S. to 56% by 2032.

Shockwaves Expected for Domestic Secondary Battery Companies if Trump Wins

On the other hand, former President Trump advocates repealing the IRA. He criticizes the IRA as "the highest tax increase in history," raising the cost of industrial energy use. He argues that policies to reduce carbon emissions, including mandatory electric vehicles, should be scrapped and that inflation should be addressed by using cheaper energy sources such as oil and nuclear power.

Jang Jeong-hoon, a researcher at Samsung Securities, said, "The biggest beneficiaries of the Biden administration's IRA policy are the Korean secondary battery industries," adding, "From former President Trump's perspective, if he is elected during the primaries or general election, he is highly likely to undermine the effects of the Biden administration's policies."

Researcher Jang also noted, "If the sustainability of the IRA policy is not guaranteed from the perspective of Korean secondary battery companies, they will need to reconsider their large-scale local investment plans that rely on tax benefits," and predicted, "From next year, when mass production supply becomes a reality due to large-scale investments under the IRA, Korea's North American mass production capacity will be significantly higher than the demand for electric vehicle batteries in the U.S."

Therefore, the greater the possibility of Trump's election, the more likely it is to act as a negative factor for domestic secondary battery-related companies. This could adversely affect major domestic secondary battery companies such as LG Energy Solution, SK Innovation (the major shareholder of SK On), and Samsung SDI. It is also expected to exert downward pressure on the stock prices of companies involved in the secondary battery supply chain, including POSCO Holdings, POSCO Chemical, SKC, and EcoPro BM.

There are also forecasts that the IRA will not be repealed even if the administration changes. Kim Hyun-soo, a researcher at Hana Securities, said, "Since the IRA is a law passed by the legislature, a change in administrative power does not directly lead to the repeal of the bill," but added, "The president's executive orders or Treasury Department regulations could significantly weaken incentives such as subsidies that drive electric vehicle growth."

Solar & Wind vs Oil, Coal & Nuclear Power

Policies related to eco-friendly energy are also a focus. The Democrats aim to decarbonize the power sector by 2035 and achieve net zero by 2050. To this end, they plan to expand the scope of IRA tax credits from next year through 2035. If tax credits for renewable energy such as solar, wind, and nuclear power increase, it is expected to positively impact the stock prices of related beneficiary companies.

Hwang Kyu-won, a researcher at Yuanta Securities, said, "Looking at the relationship between past presidential election results and oil prices, oil prices rose due to crude oil production regulations during Democratic administrations. In this year's election energy policy battle, the Democrats and President Biden will continue to support eco-friendly energy (IRA subsidies, etc.) to achieve decarbonization and net zero by 2050."

Conversely, Trump advocates policies such as expanding crude oil and oilfield development, providing tax breaks to oil, gas, and coal producers, and supporting nuclear energy production. If Trump's chances of winning increase, it is likely to negatively affect companies in the renewable energy sector such as Hanwha Solutions, OCI, Huchems, JC Chemical, Hansol Home Deco, Igeon Industry, and Ecobio, which are involved in carbon emission rights and greenhouse gas-related businesses. On the other hand, it could be a positive factor for nuclear power-related companies like Doosan Enerbility.

It is also likely to be a negative factor for domestic hydrogen-related companies. Stocks of companies promoting the hydrogen ecosystem, such as Hyosung Heavy Industries, Doosan Fuel Cell, Iljin Diamond, Hyosung Advanced Materials, and Kolon Materials, are expected to face downward pressure.

Defense Stocks Continue to Advance Regardless of Winner...Cryptocurrency Favored by Trump

For domestic defense companies, stock prices are expected to continue gaining momentum regardless of which party takes power. During Biden's term, including the Russia-Ukraine war, domestic companies' arms exports increased, boosting defense stocks such as Korea Aerospace Industries (KAI), Hanwha Aerospace, LIG Nex1, Hyundai Rotem, and Poongsan.

Unlike the Democrats, Trump advocates withdrawing from the North Atlantic Treaty Organization (NATO) and reducing involvement in global conflicts. A major asset management official said, "If Trump's defense policy materializes, major countries are likely to strengthen their own defense capabilities," adding, "From South Korea's perspective, which is currently expanding defense exports, Trump's election could actually be a positive factor."

Cryptocurrency is also a hot topic. The Biden administration maintains a negative stance on cryptocurrencies, engaging in multiple lawsuits with the industry. Although it approved a Bitcoin spot exchange-traded fund (ETF), it is known to have done so reluctantly after losing a lawsuit.

In contrast, former President Trump has shown a cryptocurrency-friendly stance. He has stated he would allow the use of Bitcoin and guarantee its future in the U.S. Accordingly, if Trump's chances of winning increase, it is expected that representative cryptocurrencies such as Bitcoin and Ethereum, as well as related stocks like Our Technology Investment, WIZIT, Galaxia Moneytree, Danal, ATinum Invest, and Vidente, will rise.

Continued China Containment...Semiconductor & Power Infrastructure Boom Continues

Both Biden and Trump share the basic stance of containing China. Both camps emphasize reshaping supply chains centered on the U.S. as a core policy direction. During his term, the Biden administration expanded export controls to include semiconductors, artificial intelligence (AI), and biotechnology. It is pushing forward from supplying advanced equipment needed for semiconductor processes to the Biosecurity Act.

If Trump, who emphasizes "America First," is elected, the China containment stance is expected to strengthen further. This is why domestic semiconductor companies are expected to benefit. A securities industry official advised, "Attention should be paid to semiconductor and related parts companies such as Samsung Electronics, SK Hynix, Hanmi Semiconductor, Isu Petasys, Techwing, Unisem, and Zeus."

There is also advice to pay attention to companies related to power infrastructure. The Biden administration has committed $1.2 trillion to infrastructure investment by 2032 and is implementing policies accordingly. Trump also announced plans to build 10 free cities across the U.S., signaling expanded infrastructure investment. Stocks of companies related to power infrastructure such as LS, LS Eco Energy, LS ELECTRIC, Daehan Cable, HD Hyundai Electric, and Hyosung Heavy Industries are expected to continue rising.

Tariff policy is another issue to watch. Kang Dae-seung, a researcher at DB Financial Investment, explained, "President Biden aims to secure tax revenue through raising corporate tax rates and increasing taxes on the wealthy," adding, "Biden's tax increase plan could secure $2.2 trillion in tax revenue over the next 11 years but may cause economic slowdown and eliminate about 780,000 jobs in the mid-to-long term. To offset the economic slowdown caused by tax increases, Biden is using tariffs."

Researcher Kang noted, "Recently, Biden ordered increased tariffs on high value-added industries such as Chinese-made electric vehicles, old semiconductors, and solar cells," and pointed out, "In a situation where AI-related industries are concentrated, these sectors will act as a driving force supporting the stock market's upward trend."

There is also advice to invest focusing on stable cash flow as stock price volatility is expected to increase during the U.S. election phase. Lee Sang-won, head of product strategy at Korea Investment Trust Management, said, "Changes in U.S. Federal Reserve monetary policy and the U.S. presidential election are the biggest variables affecting the market," adding, "It is necessary to mix investments in long-term bonds in preparation for interest rate cuts with the existing portfolio centered on semiconductors and big tech."

A KB Asset Management official said, "Depending on which party gains the upper hand, the fortunes of industries related to the respective policies will vary, but since the candidates' detailed pledges and surrounding environments continue to change, a cautious attitude is necessary," and added, "If uncertainties decrease after the election and both parties shift toward U.S.-centered interests, favorable returns are expected in sectors where the U.S. has relative strengths, such as AI, information technology (IT), and new growth industries."