[DiaryPoint = Reporter Kim Jeong-hoon] Democrats’ control of both chambers of Congress after the U.S. midterm elections has raised the prospect of policy changes as a new variable for South Korean stocks and exporters. But a shift in the balance of power in Congress does not automatically mean tariffs will be rolled back or interest rates cut. On Nov. 4, South Korean stocks opened higher on gains in U.S. tech shares, then swung with developments in the vote count. The KOSPI closed up.
A Democratic-controlled Congress could step up scrutiny of the administration’s tariff policy. But changing existing tariffs involves multiple steps, including legislation, executive authority and agreements between the two countries. It is too early to conclude that conditions for South Korean companies exporting to the U.S. will change immediately after the election. For automakers and battery makers, investors should watch legislative discussions over tax credits and whether proposed measures are actually implemented.
AI regulation debates should be viewed separately from chip demand
Stronger debate in Congress over rules for data centers and the AI industry could weigh on sentiment toward semiconductor investment. If regulation slows data center construction or access to power, demand for servers and high-bandwidth memory (HBM) could also be affected. But debate alone does not mean orders will be canceled. U.S. technology companies’ capital spending plans, along with South Korean companies’ orders and shipments, are better indicators of actual demand.
Interest rates and exchange rates are also difficult to predict based on the election alone. The outlook for government spending and Treasury issuance could affect long-term U.S. yields, while moves in the dollar feed into the won-dollar exchange rate and foreign investment flows. Investors should track U.S. inflation and employment data, Treasury yields, the dollar index, and foreign investors’ cash and futures trading in the KOSPI.
Individual investors should look beyond a single day’s rebound and follow semiconductor companies’ orders and earnings outlooks, actual spending on U.S. data center projects, and trends in long-term yields and exchange rates. The election has increased the potential for policy clashes between Congress and the administration, but the specific effects of any tariff or AI regulation changes will become clearer as legislation and implementation move forward.