Hanwha Asset Management announced on the 12th that the net asset value of its ‘PLUS K-Defense’ Exchange Traded Fund (ETF) has surpassed 500 billion won. According to the Korea Exchange, the net asset value of the ‘PLUS K-Defense’ ETF recorded 502.4 billion won as of the closing price on the 10th, just about a month after it exceeded 300 billion won on the 11th of the previous month.
‘PLUS K-Defense’ has achieved the highest rate of return among the approximately 900 ETFs listed in Korea this year. As of the closing price on the 10th, the ETF increased by 82.51% this year, and its three-month return was 102.66%, more than doubling.
Amidst recent moves by European countries to strengthen their defense capabilities, there is growing expectation for profit growth among domestic defense companies exporting weapons to multiple NATO (North Atlantic Treaty Organization) countries. This follows the U.S. halting support for Ukraine, which is at war with Russia, while showing ‘pro-Russia’ moves, leading to an increased sense of crisis within Europe.
After the breakdown of the Trump-Zelensky meeting, Europe announced the ‘EU Re-Armament Plan’ worth 800 billion euros (approximately 1,258 trillion won) and directly mentioned the necessity of rearmament, emphasizing self-reliance. However, since Europe has downsized its weapon production facilities and supply chains after World War II, there is a significant increase in demand compared to supply. This demand is expected to benefit the K-Defense industry.
Not only in Europe, but there is also a significant demand in the Middle Eastern market for replacing outdated weapons on a large scale, offering various export opportunities. The demand for replacing obsolete weapons in Saudi Arabia and the UAE alone constitutes a large market worth 18 trillion won, with potential demand in other countries as well, making the Middle East a major demand center for K-Defense.
JP Morgan, in its ‘Korean Defense’ report published on the 6th, identified ‘increasing defense spending in the Middle East’ as a positive factor for ‘K-Defense.’ It analyzed that Middle Eastern countries are increasing their defense budgets to secure large quantities of military supplies, with a significant demand for replacing old tanks, armored vehicles, and self-propelled guns introduced before 1990.
Choi Young-jin, head of Hanwha Asset Management’s Strategic Business Division, stated, “While we expected the major markets for K-Defense to be the ‘Middle East’ and ‘the United States’ by 2025, Europe is emerging as a major market once again due to changes in international dynamics, creating additional demand.” He emphasized that we must view the defense industry as a medium to long-term opportunity, given the ongoing golden age of the global defense market.
He further added, “In such a favorable international situation, K-Defense is likely to expand its presence in the European defense market through strategic approaches like local production, technology transfer, and quick delivery. By leveraging these opportunities, Korean defense companies could aggressively target the European market and establish themselves as key suppliers within the European defense industry.”