Defense stocks soar on Israel-Iran tension
Hanwha Systems, a major defense affiliate of Hanwha Group, traded at 63,800 won ($47) as of 2 p.m., up 17.46 percent from the previous session. Earlier in the day, the stock surged as high as 65,000 won, hitting the highest level since its listing on the Kospi in November 2019.
Other major defense stocks also showed strong performances, with LIG Nex1 rising 4.75 percent, Hyundai Rotem gaining 5.3 percent, and Hanwha Aerospace climbing 2.33 percent as of 2 p.m. Shares of each of the companies posted a fresh high during intraday trading.
Amid escalating geopolitical tensions in the Middle East, expectations are rising for increased exports by Korean defense companies partly due to their rivalry with Israeli firms in the arms sector. Israel may impose restrictions on defense exports to maintain its military capabilities, potentially allowing Korean firms to emerge as alternative suppliers.
"In the past, Israel suspended a shipment of Merkava tanks to Morocco during a conflict with Hamas militants. With Israel likely to prioritize securing its domestic stock of air defense systems and strategic assets, a similar scenario could unfold. This could present short-term export opportunities for Korean defense companies," said Jung Dong-ik, an analyst at KB Securities.
Despite concerns that Middle East tensions could pressure on the Korean stock market due to geopolitical risks to the country's export-dependent economy, the benchmark Kospi had remained largely flat on Monday as of press time.
After opening at 2,903.50, it dropped as low as 2,886.13 in the early hours, but recovered to an intraday high of 2,926.89, up 1.11 percent on-session as of 2 p.m. Retail investors were the only net buyers, scooping up shares worth 224.6 billion won, while foreign investors and institutions dumped 224 billion won and 7.3 billion won, respectively.
In the morning, the government held a joint emergency meeting, agreeing to maintain a 24-hour monitoring system on the financial markets.
"If market volatility becomes excessive and diverges from the fundamentals of the Korean economy, the government will take swift and bold action under its contingency plans,' a statement released by the Finance Ministry said.
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