Prime Highlights
- South Korean defence stocks surged Tuesday, with some shares approaching the Kospi’s 30% upper limit on renewed Middle East export hopes.
- Analyst Kang Tae Ho said resuming suspended negotiations with Saudi Arabia and Iraq could soon translate into firm defence contracts.
Key Facts
- LIG’s Cheongung interceptor missile offers performance comparable to the US PAC-3 at roughly one-third of the cost.
- Hyundai Rotem is in talks to export 250 K2 tanks to Iraq, with its Gulf-specific K2ME variant already completed.
Background
South Korean defence stocks rose sharply on Tuesday as signs of a resolution to the Iran conflict boosted investor confidence in the sector’s export prospects across the Middle East.
Hanwha Aerospace, Seoul’s largest defence stock, climbed as much as 11.8%. The manufacturer of the K2 Black Panther main battle tank, Hyundai Rotem, saw a gain of up to 12.67%. LIG Defense & Aerospace spiked close to the 30% upper limit on the Kospi index, and Firstec, which produces components for ground combat vehicles, also approached that ceiling.
Investors increasingly expect defence export pipelines to resume and regional orders to pick up, Mirae Asset Securities noted in a mid-June report. Analyst Kang Tae Ho at DS Investment and Securities described the anticipated end of the Iran conflict as a positive catalyst for the Korean defence industry.
LIG manufactures the Cheongung air defence system, also known as the M-SAM, which made its combat debut in the United Arab Emirates during the conflict. Analysts have noted that the Cheongung interceptor offers performance comparable to the US-made PAC-3 missile used in the Patriot system, at roughly a third of the PAC-3’s reported $4 million unit cost.
Kang pointed to Hanwha Aerospace’s suspended negotiations with Saudi Arabia and Hyundai Rotem’s talks to export 250 K2 tanks to Iraq as key reasons for optimism. He said securing orders would become a reality once negotiations resume. He also noted that the Middle East-specific K2ME variant has already been developed, making a contract signing likely in the second half of this year or in early 2027.
Vikas Pershad, portfolio manager for Asian equities at M&G Investments, said defence spending is increasingly driven by long-term strategic considerations rather than individual geopolitical events, and that those underlying trends remain firmly in place.
