U.S. President-elect Donald Trump speaks during a meeting with Republican governors at Mar-a-Lago in Palm Beach, Fla., Jan. 9. AP-Yonhap

Shares of South Korean shipbuilders and defense contractors are being highlighted as top picks in anticipation of U.S. President Donald Trump's plans to strengthen U.S. naval forces during his second term.

Power equipment manufacturers, aerospace companies, information technology (IT) companies and biotech firms are also forecast to benefit from artificial intelligence (AI) and other innovative sectors prioritized by the second Trump administration.

The projection from top analysts in Seoul is broadly the same as it was before the start of 2025. Market observers have been paying attention to whether the unpredictable Trump will carry out his pledges once in power.

"We remain little changed from our previous forecast that shipbuilding and defense stocks are beneficiaries under the second Trump presidency," a Korea Investment & Securities public relations employee said, with reference to an outlook previously made by the firm's research chief Jay Yoo.

The employee noted that Trump may be open to cooperating with U.S. allies on naval shipbuilding, exports, repairs and maintenance.

Such cooperation aims to strengthen American shipbuilding capacity in response to China, which is reported to have more than 230 times the shipbuilding capacity of the U.S., amid growing competition between the two nations.

Jeff Kim and Kim Sang-hoon, co-research chiefs at KB Securities, recommended investing alongside projects led by the Defense Advanced Research Projects Agency (DARPA) and Elon Musk.

As a research lab of the U.S. Department of Defense, DARPA is responsible for developing emerging technologies for military purposes.

Musk, an innovative entrepreneur, has gained attention as an ally of Trump.

DARPA and Musk share common interests in AI, which requires significant power supply and IT. Space rockets and biotechnology are at the top of the list of their businesses, too.

Meanwhile, experts said investing in shares of K-pop powerhouses, online game developers and other entertainment firms can be helpful despite their irrelevance to Trump policies.

"These stocks are free from trade disputes," Park Hee-chan of Mirae Asset Securities said, referring to Trump's plan to impose higher tariffs on all imports, mainly manufacturing goods, to the U.S.

Cho Soo-hong of NH Investment & Securities recommended watching cosmetics, food and beverage and health care sectors, saying that "Korean cultural content has global competence despite relatively unstable momentum in exports compared to the past."

"These related stocks are expected to gain attention from global investors [regardless of the Trump government]," he said.

Experts gave negative assessments to shares in semiconductors and secondary batteries due to Trump's opposition to the Inflation Reduction Act (IRA).

A signature bill of Trump's predecessor, former President Joe Biden, the IRA is aimed at providing $400 billion in tax cuts and credits to speed up America's transition into a green energy economy.

Exit from Seoul market

The second Trump presidency caused investors here to increasingly turn to the U.S. market in search of safe-haven assets.

The exit from the Seoul market was significant in 2024, as the benchmark KOSPI ended the year with a 9.7 percent loss compared to the previous year. In particular, the year-on-year loss hit 14 percent in the second half. The market correspondingly was ranked 20th among 21 major economies' stock exchanges.

The course of the KOSPI and junior bourse Kosdaq, however, have been moving in an upward trajectory in 2025.

The trend is raising questions over whether this year's Seoul market is as competent as the U.S. market, where investment sentiment remains bullish due to Trump's business-friendly policies.

"The time is nearing for the Korean market to rebound, so don't throw away blue chip stocks that are currently at their bottom," Lee Won-il, a portfolio manager of Woori Bank's wealth management sales strategy department, said during a YTN radio interview.

Concerning the S&P 500 index in the U.S., the manager said its valuation is the highest since the dotcom bubble in the late 1990s and the early 2000s. The dotcom bubble was driven by investments in Internet-based companies, leading to a rise in U.S. technology stock equity valuations then. Correspondingly, company profits are falling behind stock prices when it comes to growth, Lee explained.

However, an NH Investment & Securities analyst projected that the Seoul market is likely to see a prolonged exit of investors, saying, "The Trump risks, ranging from tariffs to a trade row with China, are anticipated to adversely affect overall trading."

The co-research chiefs of KB Securities said the Seoul market may "fare well as the U.S. central bank is on course to extend its rate cut."

They, however, underscored that it still may "underperform compared to its U.S. peer," hinting at a prolonged departure of investors here.

A Mirae Asset Securities analyst also noted that the investor exit "may gradually weaken as uncertainties will diminish over the year."