Construction Stocks Shrink Amid Consecutive Regulations, Rebound on Supply Expansion Expectations

[Asia Economy Reporter Koh Hyung-kwang] Construction stocks, which had been declining due to the government's successive real estate regulations, have collectively turned upward this week. It appears that investor sentiment has improved ahead of the government's announcement of a large-scale supply plan.

According to the Korea Exchange on the 16th, as of 9:50 a.m., the construction industry index on the KOSPI market recorded 87.35 points, up 1.1% from the previous trading day. It has been rising for four consecutive trading days, including a 1.8% increase the day before. Although it fell 1.5% on the day of the July 10 real estate measures announcement due to concerns about a downturn in the real estate market, it has steadily risen this week.

Following the previous day's closing gains in most construction stocks such as Shinsegae Construction (8.9%), Dongbu Construction (4.1%), GS Construction (4.0%), and Daewoo Construction (3.3%), this morning Jinheung Enterprise (15.5%), Dongbu Construction (4.4%), and Daelim Construction (3.2%) rose sharply. The construction industry index, which had been subdued by the government's successive real estate regulations such as the June 17 and July 10 measures, is interpreted as having improved investor sentiment due to news that a large-scale supply plan will be announced soon.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said on the 14th, "We are currently reviewing ways to increase supply, such as high-density development in urban areas, raising floor area ratios in the 3rd new towns, and supplying housing on sites of relocated public institutions," adding, "We will announce the supply plan by the end of July." Kim Hyun-mi, Minister of Land, Infrastructure and Transport, also announced the day before, "We will supply a total of 770,000 housing units in the metropolitan area, including 360,000 units on public land such as the 3rd new towns," previewing a large-scale supply plan.

From the perspective of construction companies that can directly benefit from land supply, it is analyzed that future performance improvement is possible. Chaesang-wook, a researcher at Hana Financial Investment, said, "Construction stocks have been tied down by various real estate regulations, but recently, as supply expansion has been discussed, supply and demand are improving," adding, "Construction stock prices are expected to gain upward momentum benefiting from the government's housing supply expansion policy."

There is also an opinion that if the supply expansion plan through reconstruction is included, it will act as an even greater positive factor for construction stocks. Park Yong-hee, a researcher at IBK Investment & Securities, said, "Since the government is shifting to a policy of increasing supply, if projects such as reconstruction, land development, and public housing expand, a favorable environment for construction stocks will be created," adding, "Although it is not yet known what measures will be included, if housing supply through reconstruction is considered, construction companies could gain greater profits."

This content was produced with the assistance of AI translation services.