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| President Yoon Suk Yeol, left, talks with Vietnamese President Vo Van Thuong at a restaurant in Hanoi, June 24. Joint Press Corps-Yonhap |
By Lee Min-hyung
President Yoon Suk Yeol's state visit to Vietnam has produced another sharp rally of Korea's defense stocks on hopes for more arms exports, after the leaders of both countries agreed to elevate their partnerships in maritime security and defense.
Hanwha Group has benefited most from Yoon's recent arms sales diplomacy. According to data from Hanwha Asset Management, its Hanwha ARIRANG K-Defense exchange traded-fund (ETF) achieved the largest weekly investment return of 13.94 percent as of June. 20. This surpasses the benchmark KOSPI's 0.54 percent drop during the same period.
A group of defense industry leaders, which included Hanwha Group Vice Chairman Kim Dong-kwan, Hanwha Aerospace CEO Shin Hyun-woo and Korea Aerospace Industries (KAI) CEO Kang Goo-young, accompanied Yoon to discuss possible exports to the Southeast Asian country due to its arms modernization plan. The Vietnamese government is pushing for the plan by budgeting $2 billion (2.6 trillion won) for the next five to seven years.
In March, Vietnam's defense minister met with officials from Hanwha Aerospace and showed interest in the firm's K9 self-propelled howitzers. KAI also expects the country to show interest in its Surion helicopters.
In response, major defense shares have extended a winning streak for the past week. According to data from the Korea Exchange, shares of Hanwha Aerospace closed with a gain of 15.06 percent this week from a week earlier. Other shares also attained solid stock growth. Shares of Hyundai Rotem achieved a gain of 8.87 percent during the same period.
Foreign investors engaged in a buying spree of major defense stocks, even if they have driven the recent decline of the main bourse. They purchased 74.6 billion won worth of Hyundai Rotem shares for three days from June 19. They have also stood at the center of the recent rise of Hanwha Aerospace by buying 61 billion won worth of its shares during the same period.
Securities firms here are on track to revise up the target stock prices of major defense firms due to growing optimism over their arms sales abroad.
IBK Investment & Securities raised the target price for Hanwha Aerospace to 160,000 won from an earlier forecast of 110,000 won.
The securities firm expects that the Hanwha affiliate will be able to meet the earnings expectation from the market in the second quarter with 2 trillion won in sales.
"The recovery in the global aerospace industry will help the company achieve sales growth," Lee Sang-hyun, an analyst at the brokerage house, said. "The firm is forecast to receive defense orders worth 26.9 trillion won by the end of 2023, from 19.8 trillion won a year earlier."
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