Seoul is vibrant and full of life. The energy radiates from large LED screens dotted across Songpa District and Olympic Park, filled with K-pop artistes dancing or advertising different consumer products. Across town, hip-hop fashion, pop art and fountains of creative youth dominate the Hongdae district, where craft makgeolli breweries and eateries selling all sorts of grilled meats and soju open into the wee hours of the morning.
The nearby Seokchon Lake, while artificially created, is beautiful amid the gentle fall of the first autumn leaves, gracing joggers and families on their way to Lotte World Adventure Island. The quiet calm is interrupted by screams of teenagers on the various scary rides across the horizon or the light shows in the night.
The Aquarium is a hit for locals and tourists alike in the maze of Lotte World Mall comprising three different buildings. At the same time, families spend their weekends in the adventure world sections, and very few shoppers emerge unscathed from the segmented offerings from local favourites to top international brands in its shopping district. Only the top two Lotte Duty Free stores are pleasantly quiet, as most Chinese daigou shoppers frequent the flagship branch at Myeongdong. Alas, that traffic has also slowed down in recent years as politics got in the way.
One can see the palpable effects of the 2.5% GDP growth forecast for 2024 by the Bank of Korea, which lowered core inflation to just over 2%. Higher exports and consumption have led to this recovery, and my short trip this year shows more stability and promise than my two trips since Covid in 2022 and 2023.
That said, Samsung’s 17.2% growth for 3Q ended September failed to meet elevated expectations in the market. Meanwhile, Taiwan’s TSMC’s 39% growth was attributed to artificial intelligence (AI) chips. Samsung has a larger core base in conventional chips used for smartphones and PCs, where demand is lagging, with Chinese chipmakers flooding the market with legacy chips and dragging down prices.
As AI continues to lead the Nasdaq higher, it is unsurprising that the Kospi is down 3% for the year, weighed down by Samsung, and essentially flat in the last couple of months. This is when even laggard markets like Singapore broke out of their slumber with the Straits Times Index’s (STI) recent strong performance and shallow correction portending another technical upside push potentially to 3,800.
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Similarly, China, which galloped over the Great Wall in late September, fell flat and gave up two-thirds of its spectacular gains just as quickly to settle on a slightly higher plateau in its Long March (Chew On This, Issue 1159, Oct 21) to claw back past market glories. The decoupling of Korea’s stock market performance from Japan, which has been making new highs while the won tracked the yen down for export competitiveness, has been stark. With stronger private sector balance sheets, more robust domestic institutional funds, and investor and governance reforms, Japan has been our dark horse of 2023 that still keeps on running.
Still, Korea continues to be a delightful country to visit because of its rich culture and food. Since I first visited 20 years ago, the thirst for foreign luxuries and brands has grown, spreading to the middle class. However, as long as chaebols and families still dominate the economy and its stock market with tangled corporate cross-shareholdings, and the trickle-down from the elites has not fully benefitted the adversarial working class, it is hard to see when this horse will move at a canter much less a full gallop.
The demographic dividend of population growth, which has carried it from its Asian Tiger growth days, has started to wane. Its troublesome northern cousins have also just sent 12,000 troops to join Putin in Ukraine. South Korean businesses have been expanding to Southeast Asia, and some, like Hyundai, have created R&D innovation hubs in Singapore. This trend will likely continue. If there were ways to invest in K-Pop agencies and cosmetic companies outside of Korea, I might consider the odd banchan or side dishes for a flutter, but I will stay away from the main course of the Kospi for now.
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D-Day in the USA
Perhaps North Korean troops are heading West to Ukraine to join Russia’s war effort since the military bases in South Korea are still staffed with American troops (with the cost not entirely borne by South Korea as Trump’s past presidency suggested). The Terminal High Altitude Area Defense (THAAD) missiles that caused Beijing to throttle K-drama and K-pop in China are still located on land once owned by Lotte Group. These and the absence of busloads of Chinese package tour groups since 2017 are but sideshows for the main event on Nov 5 — the US election.
The world hurtles towards great uncertainty. A Trump bump appears to have taken place in the first two weeks of October as Kamala’s good vibes fizzled out a tad, based on daily polling nationally and across the seven key swing states. While still leading nationwide with a 2% margin, the Democrats have seen their lead in Pennsylvania, Michigan and Nevada shrink to practically a tie while losing more ground in Arizona and Georgia, which was already polling for the red Republicans. These were all the key states that carried Biden in 2020.
There is an increasing likelihood that a 2016 repeat is possible, with the Democrats winning the popular vote but losing the Electoral College. In this case, we may have Trump Part 2. Actually, according to some political risk commentators, Trump’s campaign has already spent its lesser war chest on readying for possible legal challenges if somehow the Democrats prevail in these key swing states. In which case, the certification of the President will go all the way to the wire, and we might see a repeat of Jan 6, 2020, the day of the capitol riot that President Trump recently called the “day of love”.
His messages are amplified by Elon Musk, who not only regularly stumps for Trump personally and uses X (formerly Twitter) to promote false stories, but he has even offered Pennsylvanian voters $100 each to sign a pro-Trump petition “in support of free speech”. Tinpot dictators in the Third World must be bemused or upset that they get pilloried by the Western election monitors for vote-buying, among other serious infringements.
But in the US, money truly talks, as the cost to get on the ballot and contest in some local state and congressional elections requires a war chest multiple times what candidates in Singapore are allowed to spend per voter. For our presidential election, the limit is 30 cents per voter, and for parliamentary elections, it is $4. It is much more accessible and fair than in Western beacons of democracy.
In any case, the Trump trade is back in fashion as his Trump Media & Technology Group spac has almost tripled to US$30 ($39.54) from US$10 since September as its COO quit, alleging mismanagement on his way out. Musk’s Tesla, however, remains the worst-performing stock on the S&P 500, down 12% to date in a market that is up 20%. His coming out for Trump seems to benefit his master in the polls, but he merely arrested Tesla’s fall from US$260 to halt it at US$220. For the brave and not necessarily principled, this could be a way to play a Trump victory, although one has to be cautious that Trump has been divvying up much less spoils to his friends versus his family.
Markets continue to chug along …
Even less certain is the indirect impact on markets worldwide. With the US markets continuing to eke out steady new highs with volatility since the summer wobble dropping, one might observe that new highs are coming about on slower volumes. A Democrat win might bring relief to the rest of the world, but US markets may correct as Harris is less pro-business and taxes on venture capitalists will go up, which is why Peter Thiel and JD Vance are behind Trump. Trump’s victory may see inflation worries continue, and any rally could be short-lived as markets grapple with policy uncertainty.
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Observers have pointed out that after pulling back as suggested by Chew On This, China had overshot the downside correction levels and ended last Friday with a nice 5% bounce back from lower levels. Even our STI did not reverse to 3,500, which we had suggested was a better reentry level. Instead, it held 3,560–3,570 and recovered in the hope of retesting 3,640 again. The shallow correction suggested that there is much stronger underlying support, especially from increased allocations by institutional and retail investors, to shoot for a higher number, perhaps at least 5% up to 3,800 — an auspicious number, no doubt.
The REIT index correction, even shallower as this asset class goes too, may have run its course for now. The focus may be on the laggards trading well within their net asset values (NAV), even if it takes time for interest rate cuts to filter into increased profits and dividends. That’s where I have rolled into aside from holding unusually high levels of cash.
Others have suggested trading the event, and a technically well-supported STI through the ETF or its index stocks with low volatility could yield some extra pick-up these last two weeks to D-Day. I would remain cautious with this input to chew on: For those nibbling on side dishes now, it is best to stay manageable, less the main course that comes along after Nov 5 makes you the stuffing instead.
Chew Sutat retired from Singapore Exchange S68 after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore.
