In this handout photo released by the South Korean Defense Ministry, South Korean navy vessels taking part in a naval drill off the east coast on September 4, 2017 in East Sea, South Korea.
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South Korean defense stocks rose Tuesday, in line with a broad-based pickup in defense names globally, as the Russia-Ukraine war fuels security concerns.
Gains among South Korean names were led by Hanwha Aerospace, Korea Aerospace Industries, Hyundai Rotem and LIG Nex1.
Shares in Hanwha Aerospace surged as much as 16.67%, while Hyundai Rotem shares rose as much as 11.51%. Hyundai Rotem specializes in producing railway equipment and defense products.
Meanwhile, shares in Korea Aerospace and LIG Nex 1, which manufactures arms and aerospace equipment, gained as much as 7.77% and 7.76% respectively.
Other South Korean defense stocks were also trading higher, with Vicktek shares up 4.88%, Fistec up 4.69% and Poongsan up 7.65%.
South Korean military manufacturing companies saw demand pickup in 2024 powered by massive arms orders.
“South Korea’s position as a defense industrial powerhouse is backed up by real numbers,” a report released by the Italian Institute for International Political Studies last April stated. It also highlighted that the country’s arms exports increased from $2 billion to $3 billion in the late 2010s, hitting $7.3 billion in 2021.
The pickup in South Korean defense stocks comes amid expectations of higher defense spending by Europe, after regional leaders held security talks that touched on bolstered military spending.
The meeting touched on the need to strengthen Ukraine and European defense, after Trump and Ukraine President Volodymyr Zelenskyy clashed at the White House on Feb. 28 over differing views on how to end the Russia-Ukraine conflict.
British Prime Minister Keir Starmer also pledged to boost military spending to 2.5% of gross domestic product by 2027. Other European nations may follow suit.
Morningstar’s aerospace and defense analyst Loredana Muharremi expects European defense spending to reach 3.1% of gross domestic product by 2029, and 3.5% by 2032.
“We believe a 3.1% defense spending target by 2029 is feasible if this is strategically structured, with debt financing potentially supporting the growth, and focuses on European production and research and development,” she wrote in a report on Monday.
The Stoxx Europe aerospace and defense index surged 8% on Monday. This marked the index’s best session in 5 years.
Meanwhile, defense stocks in the U.S. also climbed Monday, after Trump made it clear that tariffs on Mexico and Canada would go into effect as planned.
— CNBC’s Lim Hui Jie contributed to this report.