U.S. President Barack Obama’s re- election may destabilize the South Korean financial market as his re-election could boost risk-on sentiment in the global market, a local think tank said Thursday.
According to the report by the Hyundai Research Institute, Obama’s second term will have a positive impact on the South Korean economy as his re-election will ease concerns over the so- called fiscal cliff. The expected persistence in the U.S. accommodative monetary policy stance will boost its real estate market, helping the global economic recovery.
The modest recovery in the world’s No. 1 economy will help South Korea’s exports, but the continued monetary easing in the U. S. was feared to reduce the trade surplus of South Korea due to the appreciation of the local currency against the U.S. dollar.
Ample liquidity in the global market caused by the U.S. quantitative easing may flow rapidly into South Korea, the think tank said, warning that the abrupt outflow of foreign funds from the country may destabilize the local financial market in the future.
In addition, the newly re-elected Obama was expected to add pressures on South Korea to import more products from the U.S., citing the U.S. trade deficit with the country, the think tank said.