The Secret Behind a 495% ETF Return: A Defense Stock Growth Scenario Decoded Through Politics

Choi Youngjin, CMO of Hanwha Asset Management, Interview
"A Golden Opportunity Has Arrived for Korea's Defense Industry to Take the Lead"
A Time When Expectations Are Proven by Numbers... 20 Years of Growth Ahead

In the unpredictable stock market, where it is difficult to foresee even a single day ahead, an unconventional figure has emerged, confidently identifying industries that will grow over the next 20 years without a moment’s hesitation.

Choi Youngjin, Chief Marketing Officer (CMO and Executive Vice President) at Hanwha Asset Management, whom I met at the company’s headquarters in 63 Square, Yeouido, Seoul, said, “I have long pondered the forces that move the world,” adding, “Ultimately, the force that drives the world is politics.”

◆ In the New Cold War Era, Korea Emerges as a Key Weapons Supplier for the Free World

Although Choi is an investment expert at an asset management firm, he does not place much importance on macroeconomic indicators. He attributes the causes of major events such as the collapse of the Soviet Union in 1991, the Asian financial crisis in the late 1990s, the dot-com bubble in the early 2000s, and the 2008 global financial crisis to political factors.

He explained, “Having experienced these historic events directly and indirectly, I realized something: the most fundamental force behind macro trends is politics, and among those, the policy direction of the United States-the ‘rule maker’-is paramount.” He continued, “Just look at how President Donald Trump is upending macro trends. The world has now entered a new Cold War era marked by the power struggle between the United States and China.”

He predicted, “Just as the power struggle between the United States and the Soviet Union lasted 46 years from 1945 to 1991, the conflict between the U.S. and China could continue for at least another 30 to 40 years.”

Conflicts continue to erupt around the world, including the war between Russia and Ukraine, disputes in the Middle East, and the border conflict between India and Pakistan. Choi noted, “This is a period when countries worldwide are reorganizing their military capabilities. Europe has experienced war, and the Middle East remains a powder keg.”

Choi defined the defense industry not simply as one that sells military supplies, but as a core sector in strategic competition between nations. He emphasized that this is a “golden opportunity” for Korea’s defense industry to take the lead. During the Korean War in the 1950s, Japan-defeated in World War II-served as a weapons production base for the United Nations forces. This enabled Japan to grow into the world’s second-largest economy by the 1980s.

Choi analyzed, “In the defense sector, Korea possesses not only its own technological capabilities but also price competitiveness and rapid delivery capacity. In contrast, Europe and the United States face constraints such as insufficient production facilities, high costs, and slow delivery.” This is why countries facing direct security threats, such as Poland, are doing business with Korean defense companies. NATO member countries in Europe cannot afford to deal with European defense firms that are expensive and deliver military supplies two to three years later.

The defense industry is a B2G (Business to Government) sector targeting governments rather than private consumers, with high barriers to entry. Choi pointed out that only a limited number of countries can manufacture weapons, and that there is an exclusive league in the overseas market.

He explained, “Outside of the United States, Russia, China, France, Germany, and the United Kingdom, there are few major players in the global defense market. In this new Cold War era, Korea is emerging as a key weapons supplier within the free world.”

◆ The Significance of 100 Trillion Won in Backlogged Orders for Korean Defense Companies

Korean defense companies are establishing a solid presence in regions such as the Middle East and Eastern Europe. The Middle East, where U.S. arms supply is restricted, is seeing rapidly growing demand for Korean-made weapons. LIG Nex1 has signed trillion-won contracts to export Cheongung II missiles to three Middle Eastern countries-the United Arab Emirates (UAE), Saudi Arabia, and Iraq-over the past three years.

Choi introduced, “The defense industry is not just a simple military business, but a national strategic industry that combines advanced science, technology, and manufacturing capabilities. The competitiveness of the defense industry is directly linked to advanced technologies such as satellites, semiconductors, telecommunications, and artificial intelligence (AI).” After the collapse of the Soviet Union, the World Trade Organization (WTO) system weakened the U.S. manufacturing base. China, which had served as the world’s factory, is being excluded from supply chains as the new Cold War takes shape. Choi believes Korea is emerging as the most rational alternative.

He emphasized, “From an investment perspective, the defense industry is now moving from expectations to tangible results.” He added, “The order backlog for defense companies has already exceeded 100 trillion won, and this is an industry where sales are skyrocketing.”

The PLUS K-Defense ETF and the Global Defense ETF, both led by Choi at Hanwha Asset Management, have achieved returns of 495.51% and 80.06%, respectively, since listing, as of September 29. Year-to-date returns are 197.44% and 84.95%, respectively, with the PLUS K-Defense ETF boasting the highest return among domestic equity ETFs, including leveraged and inverse products.

Choi firmly stated that the current defense boom is not a short-term theme or a temporary supply event. He pointed out, “This is a matter of life and death. In the world of politics and security, weapons and technology are directly linked to national survival.” He continued, “Considering manufacturing capabilities, supply chain stability, and alliance structures, the Korean defense industry is destined to be a core part of the global supply chain for the next 20 to 30 years. Even at this very moment, wars and conflicts are taking place around the world, and the status of Korea’s defense industry is quietly but firmly rising.”

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