Hanwha Asset Management, 'PLUS K Defense'... "71% Return in the Past Year"

Hanwha Asset Management announced on the 2nd that 'PLUS K Defense,' an exchange-traded fund (ETF) investing in key domestic defense industry companies, has achieved the highest one-year return among domestic investment ETFs.

According to Korea Fund Evaluation Fund Square, as of the 30th of last month, 'PLUS K Defense' recorded a one-year return of 71.88%, the highest performance among 492 ETFs investing domestically. 'PLUS K Defense' is a financial product investing in leading domestic defense industry companies, with total net assets of 254.2 billion KRW as of the 30th.

'PLUS K Defense' has shown returns of 2.46% over 1 month, 9.45% over 3 months, 23.46% over 6 months, and 52.06% year-to-date. In comparison, during the same periods, the KOSPI 200 recorded returns of -2.11% over 1 month, -7.84% over 3 months, -5.53% over 6 months, -1.13% year-to-date, and 8.33% over 1 year, indicating superior performance by the ETF.

This performance is interpreted as reflecting the earnings growth of major investment stocks in the first half, such as Hanwha Aerospace, Hyundai Rotem, and LIG Nex1. The combined operating profit of the four major domestic defense companies (Hanwha Aerospace, Hyundai Rotem, LIG Nex1, Korea Aerospace Industries) in Q2 this year was 594.9 billion KRW, showing more than triple growth compared to the combined operating profit of 194.4 billion KRW in the same period last year.

The earnings growth of domestic defense companies in the first half is attributed to increased weapons demand centered on European and Middle Eastern countries following the Russia-Ukraine war. Export performance of products such as the K9 self-propelled howitzer, K2 tank, and light fighter jets FA-50PL and FA-50M drove sales for each company. With geopolitical tensions escalating, defense spending is expected to continue rising, leading to anticipated earnings growth for domestic defense companies in the second half of the year.

The upcoming U.S. presidential election in November is also expected to present new opportunities for domestic defense companies. Both candidates, Trump and Harris, hold China-containment positions based on an America-first policy. Regardless of the election outcome, the current strengthening of cooperation between Korea and NATO is likely to lead to expanded defense exports, with a prevailing prediction of increased global defense demand.

The International Defense Industry Exhibition (KADEX), held from today until the 5th, is also expected to serve as a platform to continue the 'K Defense' order rally. The securities industry points out that the K Defense rally began in earnest with the 2022 'Defense Industry Exhibition of Korea (DX KOREA)' expo, suggesting that the momentum for orders is likely to continue.

Choi Young-jin, Head of Strategic Business Division at Hanwha Asset Management, stated, “The worsening situation in the Russia-Ukraine conflict and the escalation of the Israel-Hamas conflict are deeply regrettable, but they have increased international interest in K-Defense. The increase in self-reliant defense demand from countries worldwide is an obvious trend, so it is necessary to approach this from a long-term perspective.”