S. Korean financial market sees triple gains as Biden secures lead in US presidential race

Posted on : 2020-11-06 17:15 KST Modified on : 2020-11-06 17:15 KST
Stocks, securities and value of won all go up as foreign investors purchase over US$892 million in stocks
Dealers and brokers at work in the trading room at KEB Hana Bank’s headquarters in Seoul on Nov. 5. (Baek So-ah, staff photographer)
Dealers and brokers at work in the trading room at KEB Hana Bank’s headquarters in Seoul on Nov. 5. (Baek So-ah, staff photographer)

South Korea’s financial markets showed a triple rise on Nov. 5 with gains for stocks, securities, and the value of the won shortly after Democratic Party candidate Joseph Biden solidified his lead in the US presidential election.

The KOPSI rose to 2,413.79 points that day, up by 56.47 (2.4%) from the day before. It was the first time the KOSPI closed at over 2,400 points since Oct. 13, when it reached 2,403.15. The index started the day up 16.09 points (0.68%) to 2,373.41, and the rise only grew from there. The increase in stock prices that day was interpreted as reflecting the clearing of uncertainties as the US election began to tip in Biden’s favor. The index’s rise was propelled by over 1 trillion won (US$892.56 million) in net purchases of South Korean stocks by foreign investors. The foreign purchases centered mainly on growth areas including electrical/electronic items and chemical items (rechargeable batteries).

Major gains were registered by Samsung Biologics (6.55%), Samsung SDI (5.33%), and SK Innovation (4.15%). Shares in semiconductor companies such as Samsung Electronics (3.08%) and SK Hynix (3.49%) also recorded relatively strong gains. The KOSDAQ closed trading at 844.80 points, up 17.83 (2.16%) from the day before.

On the Seoul foreign exchange market, the won-to-dollar exchange closed at 1,128.2, down by 9.5 won. The trend was interpreted as reflecting anticipation that the dollar will remain weak amid the increasingly certain prospects of a Biden victory. This is based on Biden’s relatively strong commitment to expansionary fiscal policies in comparison with the more conservative policies of Donald Trump and the Republican Party. Further fueling the strength of the won was the Bank of Korea (BOK)’s announcement the same day that the current account balance remains in surplus conditions.

Securities prices also registered strong performance (falling interest rates), with the interest rate on three-year treasury bonds finishing the day at 0.927% per annum, down 0.028 percentage points from the previous trading day.

Uncertainties associated with US election already reflected in markets, unlikely to have major impact in near future

The South Korean government’s position is that risks associated with the US presidential election have already been reflected in the financial market, and that additional uncertainties in the domestic financial and foreign exchange markets are unlikely.

Speaking at a macroeconomic and financial meeting on Nov. 5, First Vice Minister of Economy and Finance Kim Yong-beom noted, “Some have suggested that some volatility in the global financial market may continue in the near future if the finalization of the US president election results is delayed by things such as recount requests and lawsuits.”

“Risks associated with the US presidential election have in large part been reflected already in the South Korean financial market, and with the larger framework to continue in terms of US monetary easing and fiscal policy, the likelihood of volatility increasing in the domestic financial and foreign exchange markets will be limited,” Kim predicted.

Kim Young-bae and Lee Kyung-mi, staff reporters

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