Hanwha Asset Management's 'Hanwha ARIRANG K-Bangsang' ETF Approaches 35% Return

by Ryu Hyunseok

Published 15 Feb.2024 09:11(KST)

Hanwha Asset Management announced on the 15th that as of the 13th of this month, the 'ARIRANG K-BangsanFn,' the only domestic defense-themed Exchange Traded Fund (ETF) in Korea, has risen 34.45% in just over a year since its listing on January 5 last year, outperforming the KOSPI's 17.00% increase during the same period. By specific periods, it recorded 10.77% over the past three months and 18.28% over one year.

Capital inflow into the ETF has also been steadily increasing. According to the Korea Exchange, the ETF's net asset value, which was around 59.9 billion KRW at the end of last year, rose by 9.89% within about a month to 65.9 billion KRW.

The 'ARIRANG K-BangsanFn' ETF is Korea's first defense-themed ETF investing in 10 representative domestic defense industry companies. The main constituent stocks include ▲Hanwha Aerospace ▲Korea Aerospace Industries (KAI) ▲Hanwha Ocean ▲Hyundai Rotem ▲LIG Nex1 ▲Hanwha ▲Hyundai Wia ▲Hanwha Systems ▲Poongsan ▲SNT Motiv. Notably, this ETF holds all four domestic defense companies that showed remarkable performance improvements last year within its 'top 5' weightings.

Hanwha Aerospace, which has the highest weighting in the 'ARIRANG K-BangsanFn' ETF at 21.04%, is the company with the most significant performance improvement last year. Hanwha Aerospace's operating profit last year was 701.7 billion KRW, an 86.0% increase compared to the previous year. Its sales also grew by 43.2%, from 6.5396 trillion KRW to 9.366 trillion KRW. Hanwha Aerospace successfully diversified its export destinations to regions such as Oceania by signing a contract last year to supply the armored vehicle 'Redback' to Australia.

Korea Aerospace Industries (KAI), which holds the second-highest weighting at 20.29%, recorded operating profit and sales of 247.5 billion KRW and 3.8193 trillion KRW last year, up 74.8% and 37.0% respectively from the previous year. KAI achieved its highest sales since its founding by exporting 12 FA-50 light attack aircraft to Poland last year.

Both Hyundai Rotem and LIG Nex1 showed improvements in operating profit and sales compared to the previous year. In particular, LIG Nex1's export contract for the 'Cheongung-II,' a Korean-style Patriot surface-to-air interceptor missile, signed with Saudi Arabia on the 6th, was valued at 3.2 billion USD (approximately 4.25 trillion KRW), exceeding previous industry expectations.

Additionally, negotiations are reportedly underway to export K9 self-propelled howitzers, FA-50 aircraft, and helicopters to Romania, Egypt, and the UAE respectively, raising expectations that 'K-Bangsan' exports could reach 20 billion USD this year.

Kim Gyu-yeon, manager of the ETF management team at Hanwha Asset Management, said, “Weapons export contracts do not simply end with sales but continue to generate revenue due to future maintenance, indicating that Korean defense industry performance will show a stable trend.” He added, “Currently, few countries have mass production systems, so global demand for Korean defense materials is expected to increase.”