Bin Salman Has Left... Securities Firms Maintain Investment Opinions on Stocks Related to Bin Salman

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Following the visit of Saudi Arabia's de facto ruler Crown Prince Mohammed bin Salman to South Korea, related stocks have been on a continuous decline. However, the securities industry still maintains a 'hold' investment opinion on these stocks, drawing attention. During Crown Prince bin Salman's visit, 26 memorandums of understanding (MOUs) worth a total of 40 trillion KRW were signed, but experts advise that it is necessary to watch the process over a long period, from MOUs to orders, execution, and completion.

According to the Korea Exchange on the 22nd, Hyundai Engineering & Construction, which had been spotlighted as a NEOM City-related stock, was trading at 40,050 KRW on the KOSPI market as of 9:30 a.m., up 0.25% from the previous trading day. Hyundai Engineering & Construction reached a peak of 44,450 KRW on the 14th of this month but has been declining for five consecutive trading days since then. At the same time, HanmiGlobal was down 1.31% to 33,850 KRW. HanmiGlobal hit a high of 48,900 KRW on the 7th but has been falling for 11 consecutive trading days. Samsung C&T was also down 0.41% at 122,000 KRW. Samsung C&T peaked at 127,000 KRW on the 17th, the day bin Salman visited, before declining. Despite Hyundai Engineering & Construction, Samsung C&T, and HanmiGlobal being companies directly contracted for the NEOM City project, they have recorded a downward trend. Other companies such as Heerim (-3.06%) and Yooshin (-0.36%) also showed declines.

With bin Salman’s departure, both the domestic stock market and investors fell into confusion. Related stocks that had sharply risen on expectations of bin Salman's visit rapidly declined afterward. Kolon Global and HanmiGlobal fell approximately 17% and 16%, respectively, over two days from the 17th to the 18th, when bin Salman visited. Consequently, many investors believed that the investment appeal of related stocks might have disappeared now that the event of bin Salman's visit has ended.

However, the securities industry advises maintaining investment opinions on sectors directly contracted for the NEOM City project and watching them over a long term.

Park Sera, a researcher at Shin Young Securities, said, "The pace of investment according to Saudi Vision 2030 is accelerating," adding, "Projects with fixed deadlines for construction companies require a long-term approach from order acquisition to execution and completion."

There is also an opinion that expectations for additional orders to be announced in the future still exist.

Jang Moon-jun, a researcher at KB Securities, analyzed, "Signing MOUs is the first step of the project, and Saudi Arabia, based on a favorable environment with strong oil prices, will issue many project orders in the future," adding, "After selecting project management consultants (PMC) to assist project progress and completing basic construction, full-scale project orders will be placed starting next year."

Advice was also given that it is necessary to pay attention to various fields beyond construction, which is directly related to the NEOM City project. Na Seung-doo, a researcher at SK Securities, said, "Although not included in this MOU, the defense industry is also worth attention," adding, "Due to recent drone and missile attacks on oil storage facilities in the Middle East, companies such as LIG Nex1, Hanwha Aerospace, and Hanwha Systems are also fields with high future expectations."