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.
Investors bet on rare earth, shipbuilding stocks as Trump-Xi talks near
U.S. President Donald Trump, left, shakes hands with Chinese President Xi Jinping during a bilateral meeting on the sidelines of the G20 Summit in Osaka on June 29, 2019. AFP-Yonhap
By Yi Whan-woo
A much-touted summit scheduled this week between the U.S. and Chinese leaders in Busan is boosting bets on Korean listed companies in sectors of high strategic interest to both countries, such as rare earth materials and shipbuilding.
For the first time in six years, U.S. President Donald Trump and Chinese President Xi Jinping will meet to discuss a range of issues amid escalating tensions over trade and regional influence.
The sectors drawing attention include rare earth materials and shipbuilding — key arenas in the U.S.-China rivalry for dominance in trade and defense industries.
Under the circumstances, several analysts said Sunday that Seong An Materials and Union Materials, both listed on the KOSPI, are expected to gain further ground during the Busan gathering.
Seong An Materials, a textile manufacturer, and Union Materials, a ceramic manufacturer, have been aggressively expanding into rare earth materials in recent years.
“Both have drawn investors’ attention as domestic rare-earth stocks rose following China’s export restrictions, raising hopes for spillover benefits,” Hwang Shin-hae, a researcher at LS Securities, said.
Hwang noted that while the U.S. is actively supporting domestic supply chain development and Australian projects, it still relies on China for about 70 percent of its rare earth supply.
In shipbuilding, Hanwha Ocean and HD Hyundai Heavy Industries have been in the spotlight for their links to the Make America Shipbuilding Great Again (MASGA) initiative, which aims to revive the U.S. naval shipbuilding industry in partnership with leading Korean builders, amid optimism over progress in the ongoing Korea-U.S. tariff negotiations.
Both listed on the KOSPI, Hanwha Ocean and HD Hyundai Heavy Industries are also drawing attention for their shipyards on Geoje Island, located near Busan and Gyeongju, North Gyeongsang Province — the host city for the Asia-Pacific Economic Cooperation (APEC) summit and related meetings that Trump and Xi will attend.
“A potential resolution of U.S.-Korea tariff negotiations and the MASGA initiative to counter China’s naval expansion make Korean shipbuilders essential partners, benefiting shipbuilding stocks,” Hwang said.
Beyond the U.S.-China summit, Xi’s visit to Korea — his first in 11 years — has also raised hopes for lifting restrictions in China on hallyu content, or the Korean wave, which could boost consumer, tourism and entertainment stocks.
With an expected influx of foreign visitors to Gyeongju during the APEC events, department stores, hotels, casinos, cosmetics and beauty-related stocks are also likely to benefit. The government’s recent visa-free entry policy for Chinese visitors in tour groups of three or more, implemented late last month, is expected to serve as a further catalyst.
“Given the continued increase in foreign visitors, domestic hotels are likely to maintain strong performance for the time being,” Ju Young-hoon, a researcher at NH Investment & Securities, said.
Entertainment stocks, which had lagged despite the KOSPI’s strength, are also expected to see renewed investor interest as the summit approaches. These stocks had been pressured by performance cancellations in China and capital flows into semiconductor shares.
“Stock prices have fluctuated due to short-term momentum cooling and uncertainty in China,” Ji In-hae, an analyst at Shinhan Securities, said. “But even without performances in China, fan meetings and pop-up stores have maintained steady sales, and major entertainment firms are expected to post solid third-quarter results.”