[Click eStock] "Customs Noise Zone... SW and Media Contents as 'Service' Alternatives"

In a phase where concerns about a global trade war are spreading, securities analysts have suggested that the 'service' sector, including software (SW) and media content, could be a relatively free investment alternative.

On the 11th, Donggil Noh, a researcher at Shinhan Investment Corp., stated, "Given the nature of U.S. President Donald Trump, who uses tariffs as a negotiation lever, we may face noise for a while, but domestic SW and media content can be considered alternatives during the turbulent period caused by the trade war."

Researcher Noh emphasized that we should first review the first term of the Trump administration amid the current ominous signs of a trade war. He said, "The variable that determined the performance of national stock markets in 2018 was the trade war," adding, "The U.S.-China trade war actually affected the decline in trade growth rates. The growth rates of goods and services trade were 10.2% and 10.4% respectively in 2018, but fell to -2.8% and 3.3% in 2019."

He continued, "At that time, goods trade was more affected than services trade. The decline in trade growth rates acted as a background for manufacturing-based countries and poor stock market performance," explaining, "In sectors with high interdependence such as pharmaceuticals and telecommunications equipment undergoing industrial transition, the impact of tariffs was relatively less, but electronic devices, semiconductors, and components experienced a sharp decline in trade growth rates compared to the previous three years."

Accordingly, IT services, SW, system integration (SI), security solutions, and transportation services are expected to be largely unaffected by the trade war. Entertainment, travel, and finance also show tariff-insensitive influences, though not at a faster pace.

Researcher Noh said, "This can also apply to domestic stock market investors. The domestic SW and media content sectors," adding, "If they pass absolute undervaluation, they will likely go through a phase of selecting the best stocks. From a strategic perspective, two approaches should be considered: companies that have cost-effectiveness and do not compete with U.S.-based big tech firms, and companies that maintain market share even in the domestic market."