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What Trump’s Re-election May Mean For South Korean Stocks

Daniel Kim Views  

Yonhap News

If Donald Trump is re-elected in the 2024 U.S. presidential election, it could lead to a significant drop in the South Korean stock market. This is because Trump’s America First Policy could hinder the export routes of Korean companies.

On July 9, Kim Sang Hun, Head of the KB Securities Research Center, predicted at a press conference held at the Korea Exchange that Trump’s re-election would spell bad news for the Korean stock market. He made this statement after analyzing the precedent of Trump’s first administration when Trump took office in 2017. During the trade conflict between the U.S. and China in 2018, the stock markets of China and Korea suffered significantly. It’s been forecasted that this scenario could repeat itself. Kim emphasized, “The Korean economy, which has a large proportion of exports in the flow of globalization from the 1990s to the mid-2010s, benefited, but this trend was greatly broken by the Trump administration’s deglobalization.”

Kim also predicted that it would be inevitable to revise the forecast for the KOSPI to reach 3000 points. Major Korean securities companies, including KB Securities, NH Investment & Securities, and Shinhan Investment Corp., have previously suggested that the KOSPI fluctuation range from the second half of this year to next year could exceed 3000 points. Kim said, “All these scenarios were created on the premise that the current Biden administration continues,” adding, “The specific direction and figures will only be clear after reviewing the Democratic and Republican party’s platforms released in August.”

Kim summarized the characteristics of the capital market under the Trump administration as volatile. This was due to Trump’s use of tariffs and tax cuts to prioritize national interests, resulting in large-scale fiscal spending as a side effect.

Kim said, “During the Trump administration, government bonds were issued indefinitely for large-scale economic stimulus measures and corporate tax cuts,” adding, “Naturally, bond prices fell (interest rate increase), and the Federal Reserve (Fed) also raised interest rates to prevent overheating of the economy.” He said, “Despite this, when the New York Stock Exchange fell, Trump suggested firing Fed Chairman Jerome Powell after dismissing then-Fed Chairwoman Janet Yellen, sparking controversy over the independence of the Fed.” He analyzed, “The U.S. interest rate will show a pattern of high volatility.”

Kim expected the New York Stock Exchange to perform well despite the volatility. This is based on the prospect that the U.S. real economy could improve due to national prioritization. He predicted, “Although the dollar (during Trump’s reign will induce a weak dollar in the short term), it will show strength in the long term.” When Trump showed dominance in the U.S. presidential debate held on June 28, the Standard & Poor’s (S&P) 500 index, 10-year U.S. Treasury yield, and dollar index indicators all surged.

Kim pointed out, “Compared to former President Barack Obama or his predecessors, the market’s early interest in the presidential election paradoxically indicates the significant impact the Trump administration could have on the global stock market.” He added, “Whether it’s interest rate hikes or dollar strength, whenever Trump openly expressed dissatisfaction, monetary and fiscal policies unrelated to the real economy emerged.”

He especially pointed out that inflation in the U.S. will be a critical variable. Kim said, “During the first Trump administration, the inflation rate was not an issue as it is now,” emphasizing, “If Trump is re-elected this time, tariff barriers will raise consumer prices, which will act as a political burden for Trump.”

Daniel Kim
content@viewusglobal.com

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