Defense stocks are experiencing a surge in response to the announcement of a peace agreement between the United States and Iran, with expectations for expanded exports to the Middle East.
As of 9:45 a.m. on June 16, LIG Defense and Aerospace shares rose by 232,000 won (27.46%) to 1,077,000 won. During the same period, Hanwha Systems increased by 10.55%, Hanwha Aerospace by 9.78%, Korea Aerospace Industries by 6.84%, and Hyundai Rotem by 8.69%.
Market analysts believe that the resumption of stalled defense export negotiations in the Middle East, following the U.S.-Iran peace agreement, is boosting investor sentiment.
Kang Tae-ho, a researcher at DS Investment & Securities, stated, "The end of the Iran war will serve as a positive catalyst for the South Korean defense industry. There are numerous export pipelines to the Middle East that will become active after the war concludes."
He highlighted potential opportunities, including Hanwha Aerospace's modernization project for ground weapons in Saudi Arabia, Hyundai Rotem's negotiations for K2 tank exports to Iraq, and the export discussions for the Cheongung-II missile system by LIG Defense and Hanwha affiliates, as well as the KF-21 export negotiations by Korea Aerospace Industries, all of which are likely to gain momentum post-conflict.
Additionally, Kang noted that the end of the war has highlighted the valuation appeal of defense stocks amid a potential decline in investor sentiment, predicting that discussions for contracts in the Middle East will accelerate, leading to a bullish trend in defense sector stock prices in the second half of the year.
* This article has been translated by AI.
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