PLUS K-Defense ETF Hits Record High

Hanwha Asset Management announced on September 18 that the 'PLUS K-Defense' Exchange Traded Fund (ETF) has rebounded in performance after a temporary correction last month.

The PLUS K-Defense ETF declined by 8.17% in August due to a short-term correction. However, it quickly recovered its losses this month, reaching an all-time high closing price of 56,510 won since its listing.

Looking at the performance of the PLUS K-Defense ETF this year, it has remained stable compared to the index. According to financial information provider FnGuide, its cumulative return since the beginning of the year stands at 201.93% as of the 16th, the highest among all ETFs listed in Korea, including leveraged and inverse products. Over the same period, the KOSPI's cumulative return was 43.8%.

A notable feature of the PLUS K-Defense ETF's performance is its consistent and stable returns, rather than being concentrated in specific periods. Out of a total of 1,049 domestic equity funds, only 18 products outperformed the KOSPI for seven consecutive months (January to July) this year.

For seven months (January to July), the PLUS K-Defense ETF outperformed the KOSPI by an average of 11.59 percentage points per month. Even in March, when the market fluctuated due to concerns over global trade conflicts and the KOSPI fell by 2.04%, the PLUS K-Defense ETF posted a monthly return of 7.49%.

The background to this stable performance lies in the solid results and massive order backlog in the defense industry. The four major K-Defense companies-Hanwha Systems, Hanwha Aerospace, LIG Nex1, and Hyundai Rotem-which are key holdings of the PLUS K-Defense ETF, recorded a combined operating profit of 2.2087 trillion won in the first half of this year, up 194.2% from the same period last year. Their order backlog also surpassed 100 trillion won.

It is noteworthy that a significant portion of the order backlog has not yet been recognized as revenue, and there is still potential for additional orders from regions such as Europe, the Middle East, and North America.

Choi Youngjin, Chief Marketing Officer (CMO) of Hanwha Asset Management, stated, "Revenue for defense companies is recognized based on the delivery or progress of weapon systems, and so far, only a portion of the total order volume has been delivered."

He added, "The mass production and delivery schedules of major export products are proceeding in stages, and if additional orders materialize due to global arms competition, this could serve as a favorable factor for the valuation of K-Defense companies."

Hanwha Asset Management analyzed that defense stocks are not theme stocks that react to short-term events, but rather growth stocks based on solid earnings. The company explained that as the global new Cold War era accelerates self-reliant defense efforts in various countries amid the US-China power struggle and the Russia-Ukraine war, investments in the defense sector are rapidly increasing.

Choi CMO said, "In the global new normal, where US-China tensions and geopolitical risks are expected to persist for 20 to 30 years, the expansion of defense investments by countries is a structural trend. As the 'PLUS K-Defense' ETF is expected to achieve sustainable growth from a mid- to long-term perspective, a systematic investment strategy through pension accounts is recommended."

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