Won Hee-ryong's Planned Visit to Saudi Arabia
Hyundai Construction and Others Rise Simultaneously
Expectations for Additional Domestic Corporate Orders ↑
[Asia Economy Reporter Kwon Jae-hee] Construction stocks, which plummeted due to concerns over real estate PF defaults triggered by Legoland, are now on the rise again amid expectations of winning the Neom City project. The government has announced that it will spare no effort in providing comprehensive support for Korean companies' overseas orders, boosting these expectations. The positive momentum is spreading not only to large construction companies with extensive overseas order experience but also to small and medium-sized enterprises and building material companies.
As of 9:16 a.m. on the 2nd, Hyundai Engineering & Construction is trading at 38,550 KRW, up 3.49% from the previous trading day on the KOSPI market. Hyundai Engineering & Construction also closed up 6.73% the day before. At the same time, Samsung C&T is steady at 120,000 KRW, and HanmiGlobal is up 2.46% at 43,650 KRW.
The collective rise in construction stocks follows Land, Infrastructure and Transport Minister Won Hee-ryong's announcement of his visit to Saudi Arabia on the 5th of next month to secure the Neom City project. Neom City is a project to build an eco-friendly new city near the Red Sea in northwestern Saudi Arabia, approximately 44 times the size of Seoul. It is a project led by Crown Prince Mohammed bin Salman of Saudi Arabia, with a project cost of 500 billion USD (about 650 trillion KRW). Hyundai Engineering & Construction, Samsung C&T, and HanmiGlobal are considered the companies that opened the door to winning the Neom City project. The Samsung C&T and Hyundai Engineering & Construction consortium won a contract worth 1.3 trillion KRW this year for the self-sufficient linear city "The Line" project within Neom City. HanmiGlobal also secured a special overall program management service contract worth 3.3 billion USD for "The Line" project in June last year. Recently, HanmiGlobal is reported to have additionally won a Neom City-related service contract worth 946.3 billion KRW.
Minister Won announced comprehensive support for Korean companies' overseas construction orders, raising expectations for additional orders not only for these companies but also for other domestic firms. A representative company mentioned is Sungshin Cement. It is being discussed as the first domestic cement company likely to participate in the Neom City project. Other companies attracting attention include Yushin, which operates design businesses, and SeAH Changwon Special Steel, a SeAH Group affiliate that established a joint venture with Saudi state-owned oil company Aramco. On these expectations, Sungshin Cement rose as much as 19.62% the previous trading day and is up to 3.35% today. Yushin also surged up to 29.87% the day before and is up to 3.15% today.
Lee Sang-heon, a researcher at Hi Investment & Securities, analyzed, "In the case of Middle Eastern oil-producing countries, when the market oil price is higher than the balanced budget oil price, there is a tendency to expand orders. Considering the oil price level so far, it is expected that orders in the Middle Eastern market will increase, leading to an increase in overseas orders for our companies." He added, "Especially, domestic construction companies such as Samsung C&T, with construction experience including Burj Khalifa, will be able to secure orders not only for super high-rise buildings but also for multiple housing and plant projects."
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