Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Geopolitical unrest pushes Korean defense stock prices higher
A K9 self-propelled howitzer, right, and a K10 ammunition resupply vehicle, both manufactured by Hanwha Aerospace, are seen in this undated photo. Courtesy of Hanwha Aerospace
By Yi Whan-woo
Defense stocks are gaining ground on the benchmark KOSPI, amid growing geopolitical unrest and resulting demand for weaponry across the world.
Hanwha Aerospace, an aerospace and defense arm of Hanwha Group, nearly quadrupled on the main bourse since the outbreak of the Ukraine war in February 2022.
Although it lost 3.5 percent to close at 193,000 won ($147), Monday, the company has surged more than 60 percent this year as it is undergoing consultations on arms exports with Poland, Romania and other East European countries.
The consultations come amid the heightened U.S.-China rivalry and hyperbolic threats of a possible U.S. withdrawal from NATO, as hinted at by former U.S. President Donald Trump, who is running for election again as the Republican candidate for president.
Concerning Poland, the firm sold hundreds of self-propelled howitzers and multiple rocket launchers in the biggest arms deal in Korea's history.
The company additionally plans to sell self-propelled howitzers and multiple rocket launchers this year.
Also, an aerospace manufacturer and defense company, LIG Nex1 once surged to a 52-week high of 168,600 won during intra-trading on Wednesday, over growing chances to expand its arms exports.
It shed 3.06 percent to finish at 177,700 won, Monday.
According to the sources, a consultation is underway between LIG Nex1 and the Ministry of Trade, Industry and Energy on how the company can capitalize on Korea's free trade agreements to bolster overseas sales.
"The sales of LIG Nex1 are likely to go up for the next four to five years," a source said.
The Arirang K-Defense Industry Fn, the country's only defense-based exchange-traded fund, gained nearly 20 percent this year after marking a 28.2 percent increase in 2023.
Lee Dong-heon, an analyst at Shinhan Securities, said that it is unlikely for a few countries to lead the recovery of global security and order this year as there are numerous elections — both small and big —scheduled in 76 countries around the world.
"The recent rally reflects expectations of growth for the medium to long term, but it also means that security concerns have increased. Though investors should cope with volatility following a steep surge, the rally (of defense stocks) is not likely to halt easily due to increased exports and continued regional security concerns," the analyst said.