Tourism, builder stocks rise on hopes of Korean peace
A drawing of U.S. President Donald Trump shaking hands with North Korean leader Kim Jong-un is being displayed in front of the JW Marriott Hotel in Vietnam, Wednesday. Yonhap
By Park Hyong-ki
Shares in tourism and construction are expected to rally further in the short term on the hopes of peace and better economic ties between the two Koreas following the U.S.-North Korea summit in Vietnam, analysts said Wednesday.
The benchmark KOSPI closed up 0.37 percent or 8.19 points at 2,234.79 points, Wednesday; while the KOSDAQ ended at 752.16, up 5.07 points, or 0.68 percent.
Yongpyong Resort, Ilshin Stone and Daeati are among stocks on the main bourse and tech-heavy KOSDAQ that have attracted a growing number of investors since the news of the summit came out a couple of months ago, according to the Korea Exchange.
Now that U.S. President Donald Trump has called North Korean leader Kim Jong-un his “friend” who has the potential to build the North's economy like that of Vietnam, the outlook for those shares has turned even more positive.
This has led to expectations that Washington could move to partially lift sanctions on Pyongyang if the latter gives a timetable for the phased dismantlement of its nuclear arsenal.
This would jumpstart some tourism and construction projects in North Korea by South Korean companies, which are seeking to take the initiative.
Analysts pointed to stocks linked to railways connecting the two Koreas, Gaeseong Industrial Complex and Mount Geumgang.
“Projects that could improve the quality of North Korean people's lives could draw attention in the beginning. Infrastructure stocks will see benefits,” said Kim Young-hwan, an analyst at KB Securities.
It remains to be seen how long the momentum will last.
But based on market data following the first U.S.-North Korea summit, those stocks rallied for about 30 trading days after Trump and Kim met in Singapore in June 2018, according to the brokerage.
It will take a while for such projects to take shape and have an effect on corporate fundamentals, even if the two sides make progress in their talks, Kim added.
Hyundai Rotem, a train maker of Hyundai Motor Group, and Hyundai Elevator, an elevator maker of Hyundai Group, have also been chosen as potential stocks that could remain bullish.
Hyundai Group's Hyundai Asan ran a tourism program to Mount Geumgang, and was involved in the construction of the Gaeseong Industrial Complex.
Daeati, an electronic signals maker for railways traded on the KOSDAQ, has been spotlighted since the two Koreas agreed to work together to develop and connect their railway networks in September 2018.
A South Korean train crossed into North Korea for the first time in more than a decade in November last year, but the development project has faced a standstill due to sanctions.