Blue Wave Could Lift Solar, ESS, Power Equipment Stocks
If a “blue wave” materializes in the U.S. midterm elections on November 3, with Democrats securing control of both the Senate and House of Representatives, South Korea’s stock market is expected to benefit sectors such as solar power, energy storage systems (ESS), and power equipment, according to analysis.
On the 28th, Hyundai Motor Securities Research Center’s report, titled ‘Blue Odyssey, Can the Korean Stock Market Return?’ stated, “Policy premiums for clean energy—such as solar power and secondary batteries, which Democrats prioritize—could recover, and expectations for increased demand in power investments, including power generation and transmission networks, may persist as these are bipartisan issues.”
The probability of Democrats winning both chambers has risen to 62% on the prediction platform Polymarket. If this scenario unfolds, it would mark the first time in 20 years since 2006 that the opposition party fully reclaims Congress.
The report identified “renewable energy and ESS” as the theme with the strongest rebound potential under a blue wave. This is because Democratic leadership has pledged to restore clean energy tax credits scaled back by the Trump administration and expand ESS investments if they become the majority.
Beneficiaries include Hanwha Solutions, CS Wind, LG Energy Solution, and Samsung SDI, which have local production bases in the U.S. However, immediate restoration of tax credits remains difficult due to President Trump’s veto power, and the report expects the impact to primarily stem from improved investment sentiment rather than fundamentals.
Power equipment was categorized as a sector benefiting regardless of election outcomes. Both parties have agreed on replacing aging power grids and expanding long-distance transmission networks. Companies with high ratios of transmission power equipment, such as Hyosung Heavy Industries and HD Hyundai Electric, are expected to gain an advantage.
Semiconductors, however, are unlikely to see significant impacts. This is because global diversification investments by big tech companies will continue even if data center construction in the U.S. is delayed. Sectors related to tariffs, such as automobiles, steel, and food, were rated neutral, as tariffs fall under presidential authority.
Meanwhile, the KOSPI has historically tended to rise after midterm election dates. Since 1975, in years with midterm elections, the KOSPI averaged a 2.9% gain over three months and 10.9% over six months post-election. The S&P 500 rose an average of 6.1% over three months and 13.4% over six months since 1964.
September is traditionally a weak month for domestic and international markets due to position adjustments after summer vacations, quarter-end rebalancing, and restrictions on share buybacks, leading to weaker liquidity.
The KOSPI rose in six out of the last ten Septembers but recorded an average loss of -0.84% due to larger declines. In midterm election years, this weakness tends to intensify. The KOSPI, with a high proportion of export stocks and significant foreign investor influence, often mirrors U.S. market volatility caused by election uncertainties.
This year, pressures are heightened. Individual investors concentrated net purchases in semiconductors between June and July when the KOSPI was in the 7,000–8,500 range, with many now in loss zones exceeding 20%.
Foreign investors have continued net selling since July, albeit at reduced volumes. High oil prices and U.S. Treasury yields due to the U.S.-Iran conflict, along with the Fed’s interest rate hikes, have negatively impacted foreign liquidity.
Despite this, the report advised using September’s weakness as a buying opportunity. It noted that market rebounds are typically expected from mid-October, when opinion polls and close race outcomes become clearer, even though the midterm elections are in early November.
However, this year’s election uncertainty is expected to persist until late October, as the Democrats’ Senate majority status will only be confirmed on election day.
“The September weakness stems from liquidity and event concentration, not fundamental damage,” the report stated. “Investors should view this as a buying opportunity, anticipating a year-end rally post-midterms.”