Trump Election Negative for Domestic Stock Market... Sector-Specific Responses Needed

Stock Market Weakness Amid Increased Uncertainty Following Trump's Election
Negative Impact on Domestic Market Due to Rising Interest Rates and Exchange Rates
Sector-Specific Responses Needed Amid Index Weakness...Defense, Shipbuilding, Finance Expected to Perform Strongly
Bitcoin Hits Record Highs Consecutively

Former U.S. President and Republican presidential candidate Donald Trump won the 47th presidential election, causing the domestic stock market to show weakness. This appears to reflect concerns about the negative impact of Trump's election on South Korea. On the other hand, Bitcoin soared to an all-time high, celebrating Trump's victory. Experts predict that the domestic stock market will move within a range due to Trump's election and advise differentiated responses by industry.

KOSPI and KOSDAQ Start Lower Following Trump's Victory

As of 9:15 a.m. on the 7th, the KOSPI was trading at 2,555.46, down 8.05 points (0.31%) from the previous day. The KOSDAQ recorded a 0.66% decline to 738.37.

Yonhap News

Kim Sang-hoon, Head of Research at KB Securities, explained, "(Trump's election) is expected to result in negative outcomes for the Korean stock market, with relative underperformance continuing," adding, "The strength of the stock market will be determined by the order of Trump's stimulus and pressure policies, as well as China's response stimulus measures."

Trump's election is expected to lead to rising interest rates and a stronger dollar, resulting in foreign investor outflows. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "Considering Trump's victory, the KOSPI is expected to weaken," adding, "Among Trump's fiscal policies, tax cuts and government bond issuance will lead to rising U.S. interest rates and a stronger dollar. This will stimulate won depreciation, potentially triggering foreign selling pressure and negative outcomes." He continued, "Recently, domestic private funds have been drying up due to the government's loan regulation stance, so if foreign investment also shrinks, the KOSPI is very likely to turn downward." On the same day, the won-dollar exchange rate started at 1,401.1 won, up 4.9 won from the previous day, fluctuating around 1,400 won. The exchange rate surpassed the psychological resistance level of 1,400 won during overnight trading the previous day.

Trump's America First policy is expected to act as a factor increasing uncertainty in the domestic stock market. Byun Jun-ho, a researcher at IBK Investment & Securities, analyzed, "With Trump's election, America First will be emphasized, significantly increasing uncertainty in various fields such as politics, economy, security, and industry in the domestic stock market," adding, "Especially if tariff hikes materialize, export contraction will be inevitable, likely worsening next year's export outlook."

There are opinions that differentiated responses by industry are necessary. Researcher Kim Dae-jun said, "Even if the index is sluggish, industries can be differentiated," adding, "Among major industries, infrastructure, defense, pharmaceuticals & bio, shipbuilding, and finance are expected to perform strongly."

Lee Jin-woo, a researcher at Meritz Securities, also said, "In Trump's second term, fiscal deficits are expected to expand, and if the Republican Party controls both the House and Senate, policy direction will become clearer," adding, "I prefer defense, shipbuilding, and machinery sectors that can fill the gap left by America's vulnerable manufacturing industry rather than general consumer goods, which face tariff concerns."

Bitcoin Cheers Trump's Victory... Hits All-Time High

The virtual asset market, which had bet on Trump, is celebrating. According to the market tracking site CoinMarketCap, as of 8:30 a.m. on the 7th (Korean time), Bitcoin rose about 8.43% to $75,721 compared to the previous day. Bitcoin prices broke the previous high again around 6 a.m. that day, reaching $76,460. After surpassing $75,000 the previous day and setting a new high, it set another historic peak.

Dogecoin, a meme coin related to Tesla CEO Elon Musk, who has publicly supported President Trump, also rose alongside Bitcoin. Dogecoin increased by 14.12% compared to the previous day, showing a larger rise than Bitcoin. Ethereum, the leading altcoin (virtual assets excluding Bitcoin), also recorded an 11.61% increase at the same time.

President Trump has advocated himself as a "pro-virtual asset president" during this year's presidential race. Trump promised policies supporting Bitcoin mining companies in the U.S. and replacing Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), a prominent regulator. Establishing a White House-affiliated virtual asset policy advisory committee and halting the U.S. anti-virtual asset policy "Operation Choke Point 2.0" are also among his key pledges.

The market expects the Bitcoin rally to continue for the time being. Jung Min-gyo, an analyst at Presto Research, said, "Because there is anticipation that the U.S. government's virtual asset policy will change, there is room for further Bitcoin price increases," adding, "However, in the short term, since the price has already risen significantly, it will be important to watch demand for exchange-traded funds (ETFs) for a while."

However, there is also a diagnosis that rather than warmth spreading across the entire market, a concentration on Bitcoin will be more pronounced. Analyst Jung pointed out, "As market trust in altcoins decreases, demand is polarizing between Bitcoin, which has actual usability, and trendy meme coins that have no usability."