Possible inter-Korean thaw sparks surge in reunification-related stocks

A resident of Ganghwa County, Incheon, points toward a North Korean loudspeaker installed on a hill in Gaepung, North Korea, Thursday. Yonhap

Stocks related to inter-Korean economic cooperation surged as signs of easing military tensions between North and South Korea emerged, market analysts said Thursday.

According to the Korea Exchange, shares of Ananti closed at 9,870 won ($7.27), a whopping 26.7 percent increase from the previous day. The resort hotel operator previously built a golf course and resort in North Korea's Mount Geumgang.

Hyundai Elevator, which holds a stake in Hyundai Asan — the company that owns the rights to the Mount Geumgang tourism project and the development of the Gaeseong Industrial Complex — also closed at 84,300 won, marking a 7.25 percent increase from the previous session.

Other related stocks also posted strong gains. Good People, In the F and Ilshin Stone rose by 7.28 percent, 12.67 percent and 5.39 percent, respectively, due to their past operations in the Gaeseong Industrial Complex.

The upward momentum was sparked by President Lee Jae-myung’s directive on Wednesday to suspend loudspeaker broadcasts toward the North. In response, North Korea halted its own propaganda broadcasts toward the South on Thursday.

The Ministry of National Defense explained that the move was "part of fulfilling a public pledge to restore trust in inter-Korean relations and promote peace on the Korean Peninsula."

In June of last year, the former Yoon Suk Yeol administration resumed loudspeaker broadcasts toward North Korea for the first time in six years, in response to the North’s launch of trash balloons into the South. This sparked a year-long standoff along the border, with both sides engaging in a war of loudspeakers.

Reports that the Donald Trump administration has made attempts to reengage in dialogue with North Korea also added momentum. In a briefing on Wednesday (local time), White House Press Secretary Karoline Leavitt said, "He (Trump) would like to see the progress that was made at that summit in Singapore."

Expectations are growing that construction stocks could rally if inter-Korean economic cooperation materializes.

"President Lee Jae-myung is advocating for inter-Korean and North Korea–U.S. negotiations as part of efforts to advance denuclearization on the Korean Peninsula," said iM Securities analyst Bae Se-ho. "When inter-Korean relations improved and economic cooperation was promoted in 2018, stocks across the construction value chain posted strong gains."