Global Defense Spending Burden '↑'... Thriving Defense Industry ETF

PLUS K Defense ETF Achieves Over 40% Monthly Return
Global Defense Spending Rises Amid U.S. Cost-Sharing Pressure
"Record-High Domestic Defense Exports Expected This Year"

Defense sector exchange-traded funds (ETFs) have recently recorded high growth rates. The intensifying global conflicts and the United States increasing pressure on countries to raise defense spending are cited as background factors.

According to the Korea Exchange on the 11th, among ETFs listed domestically, the top performer in returns from the 10th of last month to the day before was PLUS K Defense, with a return of 41.28%.

Following closely was TIGER Space Defense at 39.61%, PLUS Hanwha Group Stock (35.39%), ACE POSCO Group Focus (33.37%), TIGER China Hang Seng Tech Leverage (32.85%), and PLUS Global Defense (32.25%). Among the top 10 ETFs, six are related to the defense sector.

The reason defense ETFs are showing strength is influenced by U.S. President Donald Trump intensifying pressure on allied countries regarding defense cost-sharing.

President Trump recently stated to NATO member countries, "If NATO countries do not pay, I will not defend them." He also insists that NATO increase defense spending to about 5% of their Gross Domestic Product (GDP).

In addition, the European Union (EU) has introduced the so-called 'REARM Europe Plan' to strengthen defense capabilities. The plan involves mobilizing funds amounting to at least 800 billion euros (approximately 1,229 trillion won) to promote increased defense spending among member countries. This move came after the U.S. announced it would halt military aid to Ukraine.

This situation is expected to lead to increased defense spending by various countries. Lee Sang-hyun, a researcher at BNK Investment & Securities, said, "Globally, the intensity of conflicts is escalating, and there are many potential factors. Even if some wars end, military tensions and arms races are expected to intensify due to the onset of a new Cold War." He added, "Especially, the U.S.'s low-engagement policy is expected to lead to increased defense spending by countries."

This situation is expected to act as a positive factor for domestic defense companies. According to the industry, South Korea's defense exports last year were around 9.5 billion dollars, falling short of 10 billion dollars. However, the Defense Acquisition Program Administration forecasts the export target for Korean defense companies this year at 24 billion dollars. Especially, with carryover export projects amounting to 9.4 billion dollars, it is expected to set a record high this year.

Researcher Lee Sang-hyun said, "Considering the deferred orders from last year, the possibility of setting a record high in defense export orders this year is high," and added, "Assuming that defense export orders are reflected in exports from the third year, it is expected that by 2027, South Korea could achieve 4th place in global weapons exports."