Samsung Asset Management Lists New KODEX K-Defense TOP10 ETF

Recently, after some profit-taking led to a partial correction, defense industry companies are regaining growth momentum thanks to expectations for increased exports following rising defense budgets in countries around the world. Samsung Asset Management has launched an ETF that focuses on 10 "true defense" stocks?companies with a high proportion of defense sales and significant export activity.

Samsung Asset Management announced the new listing of the 'KODEX K-Defense TOP10' ETF on July 15.

The company selected 10 stocks by comprehensively considering factors that directly affect the share prices of defense companies: the actual proportion of defense sales, the proportion of overseas exports, and the integration of artificial intelligence (AI) technologies. The core strategy is to move away from simple keyword or market capitalization-based approaches and instead focus on stocks that can directly connect the fundamental performance of the defense sector to share price growth.

Approximately 80% of the ETF is allocated to the four leading domestic defense companies driving the growth of K-defense: Korea Aerospace Industries (KAI), Hanwha Aerospace, Hyundai Rotem, and LIG Nex1. It also includes stocks related to defense systems, equipment, and consumables, such as Hanwha Systems and Poongsan. The average proportion of defense-related sales among the included stocks exceeds 70% of their total sales. The strategy is to maximize investment efficiency by focusing on companies that demonstrate competitiveness through defense as their core business, rather than those for whom defense is only a subsidiary activity.

The ETF is designed to assign greater weight to stocks with high relevance to AI defense technologies and products. By reflecting the growing importance of advanced technologies such as unmanned systems and AI tactical platforms in recent conflicts, the ETF captures the medium- to long-term growth potential of K-defense companies. Considering that AI technology is transforming the defense industry paradigm, as seen with Palantir in the United States, the 'KODEX K-Defense TOP10' is expected to offer a future-oriented investment opportunity.

Despite the recent share price correction, the trend of growth in K-defense is expected to continue. Positive market developments are ongoing, such as the North Atlantic Treaty Organization (NATO) increasing its defense budget by 5%, and Hyundai Rotem finalizing a record K2 tank export deal worth 8.8 trillion won with Poland. Globally, Korean-made weapons are highly preferred due to their superior cost-effectiveness and rapid delivery competitiveness compared to similar products.

As the United States' closest ally, Korea also enjoys the advantage of lower political burden from the perspective of importing countries. With global demand for Korean weapons rising, and the government providing full-scale support policies to foster the defense industry as a "national strategic industry," the growth of K-defense is expected to continue in the second half of the year.

Lee Daehwan, a manager at Samsung Asset Management, stated, "From the second half of this year, the real distinction among defense stocks will begin, and investor interest will focus on companies with high actual defense sales and export proportions."

He added, "A paradigm shift is underway in the AI defense market with the growth of drones and AI unmanned systems. When investing in K-defense companies, I recommend considering the KODEX K-Defense TOP10, which takes into account the integration of AI defense technologies, as a strategy for the second half of the year."