US-Originated Favorable Winds, Domestic Housing Supply Expansion... Construction Equipment Stocks 'Clear Skies'

US Housing Market Strength Continues... Catalyst for Construction Equipment Exports
Increase in Apartment Construction in 3rd New Towns → Elevator Demand Up

[Asia Economy Reporter Ji Yeon-jin] The construction machinery sector shows signs of soaring higher. With the U.S. construction market recovering and domestic housing supply expanding through projects like the 3rd New Town development, demand for construction machinery is being stimulated. It is expected that not only North America and Europe, where the economy has revived due to expanded COVID-19 vaccinations, but also the Middle East, driven by rising oil prices, will lead demand for construction machinery and plant equipment.

According to the Korea Exchange on the 3rd, the KOSPI construction industry index rose 30.39% compared to the beginning of the year, and the KOSPI machinery index jumped 33.54%. In the first half of this year, the Chinese construction market showed strong performance, supporting stock prices through exports to China.

The second half is expected to see a more pronounced recovery in advanced markets. In particular, in the U.S., while low interest rates have increased housing purchasing power, supply shortages persist. In response, U.S. President Joe Biden has promised new housing supply and deregulation of housing construction, and announced an infrastructure investment plan worth $2.2 trillion. Choi Jin-myung, a researcher at NH Investment & Securities, said, "Looking at housing-related indicators, the U.S. housing market is overheated compared to the boom period just before the past financial crisis," adding, "The effect of construction machinery sales due to the real estate market boom is expected to fully materialize."

The domestic housing construction market is also in a recovery phase. Housing construction starts have been increasing since the second half of last year, and large-scale construction volumes, including the 3rd New Town, are waiting to begin. The political sector’s support for policies to expand housing supply to stabilize real estate prices is also fueling the construction market.

Recent housing market indicators are similar to those around 2005, when housing supply expansion rapidly increased; at that time, after five years of stagnation, the market experienced a decade of boom.

Given Korea’s preference for apartments, the recovery of the housing construction market is expected to lead to increased demand for elevators. Researcher Choi said, “Hyundai Elevator is the No. 1 elevator manufacturer in Korea and is directly benefiting from the housing construction market recovery,” adding, “Various adverse factors, such as uncomfortable derivative contracts with affiliated companies that occurred in the past, have been cleared, and it is undervalued compared to competitors.” Jinsung T.E.C., a domestic construction machinery equipment company, is also expected to increase exports in the future, as it counts Caterpillar, the world’s No. 1 construction machinery manufacturer, as a major client.

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