Unstoppable New Year Stock Market... Will the US 'Blue Wave' Have an Impact?

KOSPI and KOSDAQ Surpass 2950 and 980 Intraday Respectively
US Georgia Senate Election in Focus
Big Tech Expected to Decline
Sectoral Impact Differentiated

[Asia Economy Reporters Song Hwajeong and Lee Minji] As the Year of the Ox begins, the stock market continues its unstoppable upward trend. The KOSPI surpassed the 2950 mark during trading, and the KOSDAQ exceeded 980. With increasing expectations of a 'Blue Wave' in the United States, if the Blue Wave materializes, it is anticipated to have a positive impact on emerging market stocks, which is expected to sustain the upward momentum in the domestic stock market. However, it is forecasted that there will be differentiated effects across sectors due to strengthened regulations on technology stocks.

As of 9:40 a.m. on the 5th, the KOSPI recorded 2953.26, up 8.81 points (0.30%) from the previous day. The KOSDAQ rose 3.77 points (0.35%) to 981.39. This brings the KOSPI closer to the 3000 level and the KOSDAQ nearer to the 1000 level.

Both the KOSPI and KOSDAQ started the day slightly lower but reversed to gains thanks to strong individual investor buying, setting new highs again. Individual investors purchased about 560 billion KRW worth of stocks on the KOSPI, defending the index against selling pressure from institutions and foreigners.

In particular, global stock markets are closely watching the U.S. Georgia Senate runoff election held the next day. This election is the first major event of the year that securities firms are focusing on. If the Democratic Party wins, a Blue Wave?where the White House and both houses of Congress are controlled by the Democrats?will become a reality, which is expected to lead to a different market environment than before.

Democratic candidates Jon Ossoff and Raphael Warnock are expected to secure a majority of votes ahead of Republican incumbents David Perdue and Kelly Loeffler, increasing the likelihood of a Blue Wave. The market is paying attention to the fact that when a candidate’s support rate exceeds 50%, poll predictions have mostly been accurate, thus raising expectations for a Democratic Blue Wave.

Some predict that if the Blue Wave materializes, the U.S. New York stock market could experience volatility around 10%. However, domestic market experts expect sectoral differentiation but no major shocks. Investors are expected to focus on which sectors may rise or fall, and assets in emerging markets outside of U.S. stocks could benefit positively from a weaker dollar.

The sectors expected to decline are those related to Big Tech companies. Since November last year, the financial market has been adjusting to scenarios where either the Biden administration or the Republicans win the Senate. Big Tech stocks such as Google, Amazon, Apple, and Facebook have shown strength amid expectations that the Republicans could check the Democratic policies on stricter Big Tech regulations, large-scale fiscal spending, and corporate tax hikes, while government bond yields have slightly declined. However, if the results align with expectations, a 'pullback' phenomenon is anticipated.

The first market to react was the U.S. stock market. On the 4th (local time), the Nasdaq index, which is tech-heavy, fell about 1.5% due to concerns over increased regulations and tax burdens on large technology companies under the upcoming Biden administration and the Democratic Party.

However, eco-friendly sectors and cyclical stocks, which surged on Biden’s election news, are expected to continue rising. This is because the large-scale stimulus package focuses on eco-friendly infrastructure investments, and if expansion policies accelerate, companies related to electric vehicles and others are expected to benefit.

Kim Ilhyuk, a researcher at KB Securities, explained, "If antitrust regulations targeting Big Tech companies are pursued, a negative environment is expected for large technology stocks, while cyclical sectors will show strength. The increase in government bond issuance due to large-scale stimulus efforts will put upward pressure on bond yields."

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