O Se-hoon and 3rd Generation New Towns Awaken Construction Stocks... Record High Rally

Hyundai Engineering & Construction Hits Six Consecutive Record Highs Through the 22nd
Samsung Engineering Also Sets Daily New Highs Since the 20th
GS Construction and Daewoo Construction Reach Yearly Stock Price Peaks

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Major construction companies continue to hit record highs. Following the election of Seoul Mayor Oh Se-hoon in the April by-elections, expectations for Seoul reconstruction have grown, and with the full-scale construction of the 3rd New Towns and the expansion of housing supply, the outlook for construction companies' performance has improved, driving up stock prices.

Hyundai Engineering & Construction (Hyundai E&C) traded up to 50,000 KRW in early trading on the 22nd on the KOSPI market, setting a new 52-week high. Hyundai E&C had reached a record high of 46,500 KRW on January 12 during the strong market at the beginning of the year but had fallen below 40,000 KRW during a sideways market that lasted more than two months until last month. However, since mid-last month, it has steadily risen and has broken record highs for six consecutive days starting from the 15th of this month.

Samsung Engineering also surged to 15,700 KRW around 9:25 a.m. on the same day, marking a new 52-week high. Samsung Engineering has been on a three-day streak of record highs since the 20th. Previously, GS Engineering & Construction hit a new high of 46,550 KRW the day before, and DL E&C touched 138,000 KRW on the 20th, setting new records.

These major construction stocks were driven by net buying from foreigners and institutions. In the case of Hyundai E&C, institutions have been net buyers for six consecutive days since the 16th, and during the same period, foreigners have been net buyers of GS E&C. For DL E&C, foreigners have been net buyers for 22 consecutive days since the 1st of this month.

Construction stocks had previously surged once earlier this year with the rise of cyclical stocks amid growing expectations for economic recovery following the start of COVID-19 vaccinations. After a period of correction, stock prices began to rebound last month. This is interpreted as reflecting expectations that the real estate policy stance would change as the opposition party was predicted to win the April by-elections.

In fact, Seoul Mayor Oh Se-hoon proposed a "big deal card" to the government by designating redevelopment and reconstruction areas such as Apgujeong, Yeouido, Mok-dong, and Seongsu-dong in Seoul as land transaction permission zones the day before. The plan is to promote reconstruction within limits that do not shake the rapidly rising Seoul housing prices over recent years, which is favorable for construction companies as it means an increase in reconstruction contract volumes.

Additionally, from July, pre-subscription will begin in four phases in the 3rd New Towns in the metropolitan area, including Gyeyang in Incheon. Pre-subscription is a system that supplies apartments early one to two years before the main subscription, guaranteeing 100% occupancy if the winner maintains the status of a non-homeowner until the main subscription. This indicates that the construction of the 3rd New Towns, which addresses the shortage of housing supply in Seoul, has officially started.

The expansion of the Metropolitan Area Express Train (GTX) connecting the 3rd New Towns and Seoul is also positive for construction companies as it increases business opportunities. News broke the day before that four teams, including the Hyundai E&C consortium, GS E&C consortium, Shinhan Bank consortium, and Korea Infrastructure Developer consortium, are preparing bids for the GTX-C line. Park Hyung-ryeol, a researcher at Meritz Securities, said, "Attention is focused on whether the GTX-D line, connecting the western metropolitan area and downtown Seoul, will be announced in the 4th National Railroad Network Construction Plan."

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