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| President Yoon Suk Yeol speaks with officials from Hanwha Aerospace at its manufacturing facility in the nation's southeastern city of Changwon on Nov. 24, 2022. Joint Press Corps-Yonhap |
By Lee Min-hyung
Defense stocks are displaying a robust rally on hopes for more arms exports following the recent Korea-United States summit. Continued geopolitical uncertainty in Europe is also escalating hopes that Korean defense firms may win more orders there.
According to data from the Korea Exchange, a defense-centered exchange-traded fund (ETF) ― ARIRANG K-Defense Industry Fn ETF operated by Hanwha Asset Management ― achieved a 22-percent investment return for the past month as of April 26. This is the highest among listed ETFs here.
The ARIRANG ETF consists of major defense stocks here. Shares of Hanwha Aerospace also achieved a strong rebound this month. Most defense stocks closed with a gain after the summit between the two countries. Shares of the Hanwha affiliate closed with a gain of 2.87 percent on April 27, and those of other major defense stocks such as Korea Aerospace Industries and Hanwha Systems also enjoyed rare momentum for stock rebound during the same period.
South Korean President Yoon Suk Yeol and his administration are also demonstrating unwavering political will to support defense companies after taking office last year. Last week, the Fair Trade Commission approved Hanwha Group's acquisition of Daewoo Shipbuilding & Marine Engineering.
Hanwha is expected to widen its footing to maritime defense following the much-anticipated acquisition. Hanwha has so far focused on operating defense businesses in space and land. But, according to the company, the acquisition of the shipbuilder will help the group grow into a quality defense producer capable of building converged defense systems encompassing space, land and sea.
The growing geopolitical uncertainty in countries that share a border with Russia comes as a boon for Hanwha and other Korean defense companies, as weapons demand will remain solid in Europe, according to analysts.
"Hanwha Aerospace is forecast to maintain momentum to receive more orders from overseas, as demand for fire weapons will be robust in countries particularly in Eastern and Northern Europe amid escalating uncertainties regarding the war between Russia and Ukraine," Eugene Investment & Securities analyst Yang Seung-yun said.
Hanwha Aerospace is a representative defense stock of Hanwha Group. The Hanwha subsidiary is a de facto holding company of most of Hanwha's defense affiliates.
Reflecting on the rosy business outlook, the brokerage house revised the companies' target stock price to 133,000 won per share. Shares of Hanwha Aerospace closed at 102,700 won on Friday.
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