[Good Morning Stock Market] Strengthening Momentum of Eco-friendly Themes

[Asia Economy Reporter Eunmo Koo] There is an analysis that the overlapping policy-driven momentum?such as the relative rise in support for the U.S. Democratic Party, ongoing policy momentum in Europe, and expectations for the Korean-style Green New Deal to be announced this month?necessitates increased attention to the eco-friendly theme.

◆Byunghyun Cho, Researcher at Yuanta Securities=Recently, the frequency of unsettling news originating from the U.S. has been increasing. Externally, discord related to the Hong Kong Human Rights and Democracy Act is intensifying, while internally, protests triggered by the death of George Floyd are escalating. Interestingly, from the perspective of Donald Trump, who is the incumbent president facing an election about two quarters away, it seems necessary to calm domestic and international uncertainties; however, in some respects, it appears as if he is deliberately amplifying uncertainties.

With the KOSPI already above the 2000 mark, unsettling news from the U.S. is unwelcome. Although the U.S. Federal Reserve (Fed) continues to provide confidence in the liquidity environment, supporting the market's downside, the slow recovery of fundamentals means that event-driven uncertainties could stimulate stock market volatility.

Intuitively, rising political uncertainties can negatively affect investor sentiment. In fact, despite the index rising, U.S. investors' sentiment indicators remain unusually low. Considering recent circumstances, employment, which was severely contracted during lockdowns following the COVID-19 outbreak, adversely affected investor sentiment. Subsequently, uncertainties regarding U.S.-China trade relations and the intensification of protests within the U.S. appear to have negatively impacted political uncertainty and investor sentiment.

This could again act as a negative factor for fund flows. It may lower expectations for foreign inflows from our perspective. However, as mentioned, considering that Trump is intentionally utilizing a certain level of discord, it is unlikely that the situation will be allowed to escalate to an extreme that would cause a major shock to the stock market.

However, contrary to Trump's intentions, support trends are somewhat shifting toward Joe Biden, and on the online betting site 'PredictIt,' Biden surpassed Trump for the first time during the election period last week by reaching a 50% probability of winning. As internal turmoil in the U.S. spreads and Trump's support falters, differences in policy orientations with the Democratic Party may become more pronounced, with environmental policy being the area showing the greatest divergence between the two parties. A decline in Trump's support could provide positive momentum for eco-friendly themes.

Meanwhile, environmental policies in Europe continue to strengthen. Last week, France also announced environmental policies. Specifically, although it is an industrial policy aimed at the struggling automobile industry, President Emmanuel Macron plans to transform France into a leading eco-friendly automobile nation by increasing the electric vehicle purchase subsidy from the current level of 6,000 euros to about 7,000 euros, raising incentives for scrapping old diesel cars, and investing 8 billion euros to support hydrogen and electric vehicle development and battery production.

The target for electric vehicle adoption is set at 1 million units by 2025, whereas BNEF had previously estimated France's electric vehicle count at 225,000 units by 2024. Considering the relative rise in support for the U.S. Democratic Party, ongoing policy momentum in Europe, and expectations for the Korean-style Green New Deal to be announced this month, it is judged necessary to increase interest in the eco-friendly theme, where policy momentum overlaps.

◆Sangyoung Seo, Researcher at Kiwoom Securities=The China-U.S. friction continues to expand, with the Chinese government ordering a halt to purchases of U.S. soybeans. Following this news, the semiconductor sector, which had shown strength after President Trump's press conference last Friday, weakened (Philadelphia Semiconductor Index -0.50%). However, sectoral differentiation was a feature of the U.S. stock market, with financials, travel, and airlines showing strength amid expectations for economic reopening. The Korean stock market is also expected to experience a rapid rotation among sectors.

Meanwhile, protests in the U.S. are showing signs of spreading. Rather than being confined to certain areas, they are expanding nationwide, causing some retail stores to re-enter shutdowns. This could dampen investor sentiment and negatively affect the Korean stock market.

Although international oil prices weakened due to concerns over U.S.-China friction and large-scale protests, the news that OPEC+ (a coalition of OPEC and 10 major oil-producing countries) has moved its meeting forward by a week to discuss extending production cuts helped reduce the decline. Additionally, favorable announcements related to COVID-19 treatments and vaccines are expected to aid in stabilizing investor sentiment. Considering these factors, the Korean stock market is expected to continue digesting sell-offs while experiencing rapid sectoral rotation.

This content was produced with the assistance of AI translation services.