A Democratic sweep of the Senate, House of Representatives and governorships in the US midterm elections dealt a severe blow to South Korean stocks.
On November 5, the KOSPI closed at 5,383.80, down 5.28% from the previous trading session, while the KOSDAQ fell 5.79% to 837.78. South Korean stocks declined from the start of trading, and sell-side sidecar trading curbs were triggered on both markets.
This contrasted sharply with gains on New York stock markets as political uncertainty eased. The South Korean decline was attributed to expectations of various restrictions affecting semiconductors and data center construction. Democrat Gina Hinojosa was elected governor of Texas, a state known as a data center hub. Hinojosa had pledged an immediate moratorium on approvals for new data centers statewide. Analysts suggest that slower data center construction would affect related industries and semiconductor demand.
Against this assessment, semiconductor leaders SK hynix and Samsung Electronics fell sharply. SK hynix declined more than 9% and Samsung Electronics more than 7% from the previous session.
In the KOSPI's electrical and electronics and machinery and equipment sectors, foreign investors were net sellers while individual investors bought heavily. In electrical and electronics, foreign investors recorded net sales of 3.6403 trillion won, while individuals recorded net purchases of 3.0572 trillion won. In machinery and equipment, foreign investors sold a net 77.8 billion won, while individuals bought a net 72.1 billion won.
As volatility increased in stock and other markets, Deputy Prime Minister and Minister of Finance and Economy Lee Hyoung-il held a market conditions review meeting on November 5 at the Export-Import Bank of Korea in Yeouido, Seoul, together with the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service.
Participants assessed that the effects on South Korea's financial markets and real economy could vary depending on how US policy actually changes after the midterm elections and how quickly those changes are pursued. They plan to continue monitoring the implications of changes in US AI industry policies and regulatory conditions, tariff policy and developments in the Middle East war.
Meanwhile, the current account recorded a surplus of $61.46 billion. This was an increase of $15.34 billion from the previous month and the first time the surplus exceeded $60 billion.
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Goods exports reached a record $121.05 billion, up 83.7% from the same month a year earlier. Strong performance in both IT and non-IT products kept exports above $100 billion for a fourth consecutive month.
Asked whether the US midterm elections could affect the current account, Kim Young-hwan, director general of the Bank of Korea's Economic Statistics Department 1, said: "All kinds of news are coming out, and we will have to wait and see." Kim added: "There are still many variables in areas including data centers and AI investment, so I think we will have to watch developments."
Original Korean article: ZDNet Korea
English brief by Korea Wind Intelligence, koreawindintel.com
