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| K9 self-propelled howitzers are lined up at a military training spot in the border city of Paju, Gyeonggi Province, in this Aug. 29, 2022 file photo. Yonhap |
By Lee Min-hyung
Shares of major defense companies have extended a surprising winning streak this year on growing arms exports to Europe and escalating geopolitical uncertainties on the Korean Peninsula following North Korea's repeated missile threats.
Data from market tracker FnGuide showed a combined market capitalization of 17 defense and aerospace stocks listed on the Korean stock market have surged by around 20 percent this year. The figure came in at 17.2 trillion won ($13.48 billion) as of Tuesday, up 19.32 percent from the end of 2022.
The stock price of Hanwha Aerospace, the nation's most valuable defense stock by market cap, has seen the biggest growth with a gain of 49.46 percent during the same period, as its earnings performance is forecast to remain solid this year after the successful export of K9 self-propelled howitzers to Poland.
Other major defense stocks also achieved double-digit growth in their stock value. Shares of Hanwha Systems attained a rally of 34.22 percent this year. This surpasses that of the benchmark KOSPI, which rose by around 18 percent.
"Hanwha Systems serves as a point of connection in the nation's major defense-related growth areas ― such as aerospace and urban air mobility, and is a key developer of multi-functional warfare communication systems," Na Seung-doo, an analyst at SK Securities, said. "We revise up the firm's target stock price to 20,000 won per share." The stock traded at around 14,800 won on Friday.
The outlook for their additional stock growth remains positive, as the Korean government is stepping up its efforts to support arms exports of defense firms. President Yoon Suk Yeol and his administration displayed a slogan of turning Korea into one of the world's four major arms export countries by 2027. The Yoon administration set a target of achieving a 5 percent share in the global arms export market.
According to a report released by the Stockholm International Peace Research Institute, Korea accounted for 2.4 percent of the global arms export market share on average between 2018 and 2022. This is a surprising increase of 74 percent from the previous five years. The annual market share is also on the rise. Korea came in at the 12th place in global arms export in 2017 but rose to the ninth-largest country in the latest report by the institute.
Boosted by the growing optimism in the industry, other defense-related investment products are on a rally. Hanwha Asset Management's defense exchange-traded fund (ETF) ― ARIRANG K-Defense ETF ― reported a gain of around 30 percent this year alone after its launch on Jan. 5.
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