[MarketING] Greenlight Turned On for Renewable Energy Stocks

KOSPI Continues 7-Day Consecutive Rise
Renewable Energy Stocks Strong on IRA Benefit Expectations

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] Ahead of the release of the US December Consumer Price Index (CPI), the market generally showed a wait-and-see stance, while renewable energy stocks surged significantly, leading the KOSPI to a seven-day consecutive rise.

Strong Performance of Renewable Energy Stocks such as Solar and Wind Power

On the 12th, the KOSPI closed at 2,365.10, up 5.57 points (0.24%) from the previous day, continuing its seven-day winning streak. The KOSDAQ ended the day at 710.82, up 1.05 points (0.15%).

Despite limited gains due to cautious sentiment ahead of the US December CPI announcement scheduled for that night, renewable energy stocks such as solar and wind power showed notable strength. Kim Seokhwan, a researcher at Mirae Asset Securities, analyzed, "Solar and wind power stocks showed strength today, reflecting expectations of increased corporate value following Hanwha Solutions' news of establishing an integrated solar production complex in the US. Additionally, wind power stocks strengthened due to the stock price rise of a US wind tower company."

Hanwha Solutions closed at 48,100 KRW, up 2.89% on the day, recovering the 48,000 KRW level after six consecutive days of gains. Expectations of benefits from the Inflation Reduction Act (IRA) related to US investments pushed the stock price up. Hanwha Solutions announced its US solar module investment plan the previous day. It will build an integrated complex for ingots, wafers, cells, and modules with a capacity of 3.3 gigawatts (GW) in Georgia. The project aims for completion in 2024 with a total investment of 3.2 trillion KRW. Once Hanwha Solutions completes new and expanded facilities by the end of next year, local module production capacity will increase to a total of 8.4 GW. Cho Hyunryeol, a researcher at Samsung Securities, forecasted, "In 2026, when the invested facilities are expected to operate at 100% capacity, tax benefits of 875 million USD (approximately 1.1 trillion KRW) are anticipated. Hanwha Solutions' tax benefits will start at 200 billion KRW this year and reach 7.7 trillion KRW over ten years."

Lee Jinmyeong, a researcher at Shinhan Investment Corp., said, "Recently, solar industry stock prices have been sluggish due to sharp drops in energy prices, concerns about a global economic recession, and product price declines, but these factors are not considered to undermine the fundamentals of the solar industry. Despite short-term investment sentiment weakening, considering the increased valuation attractiveness and secured mid-to-long-term growth potential as a renewable energy company, the upside remains valid."

Wind power stocks also rose sharply. The rise in wind power stocks on the New York Stock Exchange the previous day and overseas investment news boosted stock prices. CS Wind rose 9.55%, CS Bearing 7.49%, Dongkuk Industry 4.56%, and Unison 2.33% to close the day. On the previous day’s New York Stock Exchange, Broadwind’s stock surged 112% intraday after winning a new wind tower project order. Broadwind closed at 4.45 USD, up 96.90%. On this day, CS Wind disclosed that it signed a contract to supply wind towers worth 50.8 billion KRW to Taiwan. Moon Kyungwon, a researcher at Meritz Securities, said, "CS Wind’s sales this year are expected to increase by 34.6% year-on-year to 1.89 trillion KRW, and operating profit is expected to rise 97.2% to 149.6 billion KRW. These forecasts do not consider production tax benefits from the US IRA, but based on the production tax benefit guidelines presented in the first quarter of this year, further upward revisions of performance are possible."

Favorable Stock Supply and Demand Situation, KOSPI Rebound Phase to Extend if CPI Meets Expectations

With the stock supply and demand situation turning favorable, interest in earnings stocks is expected to increase.

Choi Yujun, a researcher at Shinhan Investment Corp., said, "This week, the KOSPI has surpassed the significant 20-day and 60-day moving averages, indicating a favorable change in stock supply and demand. As the Q4 earnings announcements are underway, there is a high likelihood that more weight will be placed on earnings variables, favoring earnings stocks with supply and demand capacity."

Meanwhile, if the US CPI announced that night meets expectations, the KOSPI rebound phase is expected to extend. Researcher Choi said, "If the December inflation data meets or falls below expectations, inflation will eventually slow down, and with the perception spreading that we are in the late phase of tightening, the KOSPI rebound phase will continue."

On the other hand, if the inflation slowdown is less than expected, concerns about inflation may rise again. Researcher Kim said, "If the inflation slowdown is less than market expectations or if inflation excluding food, energy, and housing costs?as mentioned by Fed Chair Jerome Powell?unexpectedly rises, concerns and tension about inflation could increase again. If the CPI results are welcomed, the S&P 500 index is expected to attempt to break through the previous high of the 4,000 level, but if the results come out higher than expected, the market could be shocked and fall by about 2.5-3%."

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