Hyundai Motor Securities: Blue Wave in U.S. Midterms Could Benefit Solar and Battery Stocks

As the U.S. midterm elections approach in one week, forecasts suggest that uncertainty in the domestic stock market may ease following the elections. If the Democratic Party secures majorities in both the House and Senate, known as a 'Blue Wave,' sectors related to solar energy and secondary batteries are expected to benefit.

Choi Je-min, a researcher at Hyundai Motor Securities, stated during a press conference on October 27 at the Korea Exchange in Yeouido, Seoul, "The KOSPI has a high proportion of export stocks, and foreign investor sentiment significantly influences the index's direction. As we approach the midterm elections in early November, uncertainty regarding election outcomes and policy changes is increasing."

Currently, the domestic stock market has been experiencing weak returns since June, compounded by rising global interest rates, which have dampened investment sentiment among both individual and foreign investors. Although foreign investors have reduced their net selling since July, they continue to maintain a selling bias. Choi analyzed that in September, the normalization of liquidity following summer vacations coincided with tax-related selling and restrictions on stock buybacks, leading to weakened supply and demand.

There are also positive assessments regarding the potential for a market rebound after the midterms. Historically, since 1975, the average three-month return of the KOSPI following U.S. midterm elections has been 2.9%, with a six-month average return of 10.9%. Choi noted that with the possibility of the Democratic Party securing majorities in both chambers, uncertainty could begin to ease by the end of this month.

Hyundai Motor Securities believes that even if a Blue Wave occurs, President Donald Trump's foreign, trade, and security strategies are unlikely to change significantly, as the president's authority in foreign policy is relatively strong compared to Congress. There is a possibility that the Trump administration may increase pressure on the South Korean government regarding U.S. investments, which could impact domestic companies.

If the Democrats win, the sectors expected to benefit the most include solar energy and secondary batteries. Choi stated, "The Democratic leadership has indicated that if they return to power, they will restore reduced clean energy tax credits and expand investments in renewable energy, transmission networks, and energy storage systems (ESS)." He added that despite ongoing trade barriers against South Korean products, domestic solar, renewable energy, and ESS companies are expected to benefit.

Another factor that could influence the domestic stock market is the upcoming listing of Anthropic next month. Choi mentioned, "Once the scale of Anthropic's public offering and its corporate value are confirmed, there may be increased supply and demand pressure on existing AI-related stocks, semiconductors, and large tech companies to secure cash. However, after Anthropic's listing in November, a reevaluation of the AI theme may be possible."

Regarding the potential return of foreign capital, he stated, "It is expected to occur around late November when major events such as the U.S. midterm elections, the APEC summit, and the Anthropic listing are all concluded."