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Corona 19 Reproliferation Tax Concerns … Watch Out for Increased Volatility
Weak dollar, strong yuan … Lead to a decline in the exchange rate.
Treasury bond rates expected to rise due to massive fiscal expansion
Former Vice President Joe Biden, the Democratic presidential candidate of the United States, was elected after surpassing President Trump. Photo = Yonhap News
The United States presidential elections ended in a battle of dry counting as blood. The goddess of victory raised the hand of Democratic presidential candidate Joe Biden. President Donald Trump has declared his objection to the presidential election, but the financial markets are preparing for the Biden era. Experts predicted that the value of the stock market and the won will be strong and bond yields will rise, reflecting the expectation of massive economic stimulus.
◆ “Eliminate uncertainty … to put the stock market back”
On the 9th, the KOSPI index rose 1% and is trading at the 2450 level. The index rose to 2459.15 during the intraday, breaking the ointment point. The highest point of the previous year was 2443.58 (September 15).
The reason for the stock market surge is that, when Joe Biden confirmed his win, expectations of additional stimulus measures boosted investor confidence. Also, foreigners and institutions are increasing the index as they get closer to buying.
Experts expected Joe Biden’s presidential victory to have a positive impact on the stock market. President Trump expressed his willingness to disagree with the presidential election, but saw the odds of nullifying the results.
Moon Jong-jin, a researcher at Kyobo Securities, predicted that the stock market has entered a risky phase due to uncertainties related to the decline in the US presidential election. Investigator Moon said, “The possibility of the Republican Party taking over the United States Senate has increased, but this is leading to the rise of big tech stocks,” Moon said.
Lee Eun-taek, a researcher at KB Securities, also expressed the view that the case of the Republican Party dominating the US Senate is not a negative factor.
Researcher Lee said, “In the past, America’s separation from the Democratic Party of the President and the House of Representatives was the best combination of equity returns.” It is worth looking for an opportunity in ”, he emphasized.
However, experts believed that the agreement on economic stimulus measures and the spread of the new coronavirus infection (Corona 19) were stressors. Currently, the number of new confirmed cases in the United States has skyrocketed to 120,000, increasing the possibility of re-implementing social distancing and economic lockdown. Researcher Moon explained: “If the United States has an economic blockade, as in the case of Europe, increasing volatility in the stock market is inevitable.
Expectations are spreading that Joe Biden’s victory in the presidential election will have a positive impact on the stock market. Photo = Getty Image Bank
◆ Strong Biden Beneficiaries … Promising Green Energy Reserves
As the stock market explodes, there is an active movement to find beneficiaries following the election of candidate Biden. Candidate Biden pledged to invest $ 2 trillion in clean energy and infrastructure over the next four years. Additionally, it has pledged to dedicate $ 300 billion out of $ 700 billion to artificial intelligence (AI), 5G, communication platforms, and electric vehicles.
As Biden puts its ‘green’ policy as its primary commitment, it is discussed that in the stock market, green energy stocks such as solar and wind power and secondary batteries will show promise. The pharmaceutical and biological stocks, where expectations of a revival of ‘Obama Care’ are spreading, are also exciting.
On the stock market on this day, KC Cottrell, the owner of solar power(11,750 + 10.33%)CS Wind, the owner of wind power, has skyrocketed for the second day(130,500 + 15.49%)And JC Chemical, which produces green renewable energy(7600 + 13.60%)It is increasing by more than 13%. Owner of secondary battery SK Innovation(157,000 + 10.95%)And Samsung SDI(533,000 + 6.81%)They are strong at 10% and 7% respectively.
SK Securities researcher Hyo-Seok Lee said: “In the context of the big event of the US presidential election, there is a high possibility that companies and stocks that are expected to see clear growth or a solid political support will benefit. “(734,000 + 1.94%) Growth stocks and green policy actions that have sufficiently digested these negatives will increase. “
◆ Weak dollar and strong yuan … The fall in the exchange rate between the won and the dollar is inevitable
Experts predicted that the won-dollar exchange rate will continue to fall for the time being. This is because the dollar is expected to continue to weaken as expectations for large-scale economic stimulus measures rise along with the news of Biden’s election.
In addition, it is analyzed that the yuan will be strong, which will lead to a strong won value due to the recovery of the Chinese economy and the alleviation of conflicts with the United States-China after the election of Biden.
On that day, the won-dollar exchange rate on the Seoul foreign exchange market fell to 1,112.7 won during the intraday. It has been 21 months since February 27 (1,119.1 won) last year that the won-dollar exchange rate has fallen to 1,110 won.
The won-dollar exchange rate began to fall sharply since last month. The won-dollar exchange rate fell from 1,163.4 won on the 5th, the first trading day of last month, to 1,135.1 won on the 30th, the last trading day of last month, and fell about 30 won in a month. As of this month, it was reduced by an additional 15 won.
Park Sang-hyun, a researcher at Hi Investment & Securities, predicted that the won-dollar exchange rate would enter the 1,000 won range. He said, “In the first half of next year, the won-dollar exchange rate will drop to 1080 ~ 1090 won.”
However, experts predict that the rate of decline will be modest. Samsung Futures researcher Jeon Seung-ji said: “Reflecting Biden’s election, the pressure from the weak dollar will continue, but the rate of decline will be moderate due to the reproliferation of Corona 19 in the United States and Europe.
An analysis suggests that the won-dollar exchange rate may fall to the 1000 won level, while there is an expectation that the won-dollar exchange rate will continue to fall for the time being. Photo = Getty Image Bank
◆ “Upward Trend in US Bond Yields in Europe … Market Rates Will Rise”
The fiscal expansionary policy of the United States is expected to lead to an increase in bond yields. The Woori Financial Management Research Institute explained, “It will stimulate sentiment for inflation expectations and act as pressure to increase market interest rates and US government bonds.”
Biden announced that he would release $ 3.9 trillion (about 4.370 trillion won) by 2024 through the presidential candidate’s promise to boost the game. Experts believe that the remaining $ 2.5 trillion can be covered by issuing government bonds, since the increase in tax revenue through tax increases is only 1.4 trillion won (about 1.570 trillion won). .
KB Management Research Institute said: “A large-scale issuance of government bonds in the United States is expected to lead to an increase in the volume of government bonds in Korea,” and said that “government bond rates from Korea, which are highly correlated with rates on US government bonds, may also go up.
Since Treasury yields affect other bond rates as well, it is likely to lead to an increase in market rates. This means that rising interest rates on bank loans and mortgage loans based on financial bonds is also inevitable. Hwan-jong Shin, a researcher at NH Investment & Securities, said: “Interest rates on US and European bonds are already showing an upward trend” and “We will raise market interest rates as bond rates in emerging countries are also strong. “
Shin Dong-soo, a researcher at Eugene Investment & Securities, said: “Expectations of economic stimulus through financial expansion, the resulting supply burden and the risk of rising interest rates coexist.” He emphasized.
Chae Sun-hee / Yoon Jin-woo / Lee Song-ryul, Hankyung.com reporter [email protected]
