'Heavy-bottomed' Utility and Machinery Stocks Stir Amid War Fears and Presidential Election Themes

From Last Month to the 4th of This Month
KRX Utility Yield Up 19.45%

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] So-called "heavy-bottomed stocks" such as utility and machinery-related stocks are showing an upward trend. They have surged due to benefits from rising raw material prices following Russia's invasion of Ukraine and being identified as theme stocks for certain candidates during the presidential election period.

According to the Korea Exchange on the 7th, looking at the KRX sectoral returns from last month to the 4th of this month, KRX Utilities recorded the highest return with a 19.45% increase. This was followed by KRX Transportation (16.72%) and KRX Machinery Equipment (14.58%). During this period, the average return of KOSPI-listed companies was only in the 2% range.

Utility companies supply electricity and gas, which are closely related to raw material prices. As geopolitical conflicts between Russia and Ukraine caused a sharp rise in raw material prices such as international oil and natural gas, related stocks showed a strong upward trend. Over the past month, Korea Gas Corporation (24.86%), Samchully (8.32%), and Daesung Holdings (6.92%) showed significant gains.

The situation also influenced the growing calls, especially in Europe, which is facing an energy supply crisis, to expand nuclear power generation. Power plant equipment companies such as KEPCO Industrial Development (16.59%), KEPCO Engineering & Construction (16.84%), and nuclear power cycle machinery company Doosan Heavy Industries & Construction (25.43%) showed steep upward trends. Additionally, expectations that nuclear power might regain attention after the presidential election helped the stock price rebound. Korea Electric Power Corporation, which was negatively affected by the nuclear phase-out policy, showed a double-digit rise due to improved earnings prospects from lower power generation costs. Regarding the candidates' pledges, Yoon Seok-yeol of the People Power Party advocates for ending the nuclear phase-out policy, while Lee Jae-myung of the Democratic Party shows an attitude of continuing to use operating nuclear plants but not constructing new ones.

The rise in defense stocks is also notable. The ongoing fear of war has increased demands for military strength, which is reflected in stock prices. Major domestic defense stocks such as Nexon (16.93%), Hanwha Aerospace (11.7%), and Korea Aerospace Industries (4%) showed an upward trend over the past month. Furthermore, the current situation has raised views that tensions with North Korea may intensify after the presidential election. Dongheon Lee, a researcher at Daishin Securities, explained, "The presidential election is underway, and if the opposition party wins, tensions with North Korea could intensify. Discussions on fighter jet support with the U.S. and Polish governments, among others, indicate that defense stocks may continue to attract attention even after a short-term surge due to the prolonged Ukraine crisis."

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