Korean market braces for second Trump term in wake of assassination attempt

Defense stocks and bitcoin prices surged in Korea in the wake of the assassination attempt on U.S. President Donald Trump over the weekend, while local analysts the won is expected to stay weak.

The price of Bitcoin is displayed on an electronic board at the Upbit Lounge in Gangnam District, southern Seoul, on Monday as Bitcoin soared with investors betting on former U.S. President and current presumptive Republican nominee Donald Trump's chances against incumbent President Joe Biden after the assassination attempt on Saturday. [NEWS1]

Defense stocks and bitcoin prices surged in Korea on Monday as many investors expressed increased expectation of an election victory for former U.S. President Donald Trump in November following an assassination attempt at a rally over the weekend, making market moves accordingly.

Some Korean analysts are also betting on the seemingly heightened odds of another term for Trump, expecting that his second term will keep the local currency weak against the dollar as traders are likely to opt for safe-haven assets.

Hyundai Rotem advanced 7.51 percent on the Kospi bourse on Monday to close at 42,950 won ($31.06). Its share price peaked at 44,900 won at around 10:05 a.m., up 12.39 percent, which marked a fresh 52-week high for the arms manufacturer.

LIG Nex1 also spiked to a new yearlong high of 241,000 won mid-trading, up 16.99 percent, at 10:20 a.m., before closing at 233,500 won.

The missile developer’s latest rally is also attributed to its Poniard guided rocket system passing the U.S. Department of Defense's foreign comparative testing, which laid the foundation for the company to potentially sign Korea's first arms export deal with the U.S. Navy.

Hanwha Aerospace closed up 4.54 percent at 265,000 won after touching 271,500 won at 10:05 a.m.

The uptick in the defense sector is driven by investor anticipation of an election win by Trump, according to local analysts, an outcome that now appears more likely than before the shooting in Pennsylvania, which may boost defense spending across European nations as the former president has previously threatened to leave NATO.

“The Kospi saw a net outflow of foreign capital as investors are favoring safe-haven assets following the assassination attempt, yet the index remained largely flat,” noted Lee Jae-won, an analyst at Shinhan Securities, in a report published Monday.

“As the shooting at the Trump rally significantly boosted his chance of winning the election, stocks in defense, bitcoin and nuclear power sectors are gaining traction,” said Lee.

Meanwhile, nuclear power stocks, including Kepco E&C and Doosan Enerbility gained in the domestic market as Trump has backed nuclear power in his policy pledges. The upcoming announcement of a preferred bidder for the massive nuclear plant project in the Czech Republic, for which a consortium led by KHNP is competing against France's EDF, also significantly drove investor sentiment.

The benchmark Kospi gained 0.14 percent, or 3.92 points, to close at 2,860.92 points on Monday, with foreigners net shedding 77.42 billion won worth of shares.

Bitcoin was trading at 88.26 million won as of 4:20 p.m. on Upbit, Korea's largest cryptocurrency exchange, up 4.5 percent from 24 hours ago. Its closing price stood at 82.90 million won on Saturday.

On Binance, Bitcoin soared to a two-week high on Monday and stood at around $62,935 as of 4:20 p.m., up 4.95 percent from its trading price 24 hours prior. The latest uptick is widely attributed by market analysts who spoke to outlets such as Reuters to the growing anticipation of a Trump election win, as the former president has been a vocal advocate of cryptocurrencies.

Samsung Securities on Monday predicted that "the attempted assassination at the Pennsylvania rally is likely to solidify Trump's lead in the race,” citing the former president's advance on PredictIt, a political betting website, as one of the key indicators. Trump's chance of winning was predicted to be around 67 percent, while President Joe Biden's chance was estimated at 24 percent as of Monday.

The wider trend in polls following Biden’s dismal performance during the presidential debate also suggested a clear lead for Trump against the presumed Democratic Party nominee, according to Samsung.

Kim Dae-jun, an analyst at Korea Investment and Management, noted that the Kospi is likely to be “exposed to risks of downward pressure in the short term” as “the preference for safe-haven assets may expand due to the unique situation of a U.S. presidential candidate suffering from an assassination attempt.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]