South Korean Defense Stocks Fall as U.S. Midterms Spark Hopes for Mideast Truce
By Kwanwoo Jun
South Korean defense stocks led declines in the domestic market, tracking their U.S. peers overnight as a Democratic sweep of the midterm elections raised hopes for an end to the conflict in the Middle East.
Guided-missile manufacturer LIG Defense&Aerospace ended 15% lower for the day--the sharpest daily percentage decline in a year--leading the selloff among local defense stocks. Self-propelled howitzer and aircraft-engine maker Hanwha Aerospace also fell 7.5%. Fighter-jet supplier Korea Aerospace Industries slid 3.3%. Armored-vehicle maker Hyundai Rotem lost 5.8%.
Steep losses in local defense shares, which dragged the Kospi 5.3% lower, mirrored the sharp declines of their U.S. peers overnight, as investors began pricing in the possibility of tighter defense-spending controls under a Democrat-controlled Congress. Lockheed Martin plunged 6.9% and Northrop Grumman fell 4.5%.
Democrats' sweeping gains in the U.S. midterm elections have largely been viewed as a rebuke of President Trump, who launched a war against Iran earlier this year.
The Middle East conflict--coupled with the Russia-Ukraine war--has created opportunities for South Korean defense companies to expand their presence especially in Saudi Arabia, the U.A.E. and Poland.
President Trump's threats to withdraw from the North Atlantic Treaty Organization have also prompted European nations to rearm, boosting demand for defense equipment in the region.
Capital Alpha Partners analyst Byron Callan said a Democrat-controlled Congress may reduce the likelihood of a major increase in defense spending before January and raise the risk of a federal funding lapse beginning Dec. 12, according to The Wall Street Journal.
Seoul-based Eugene Investment & Securities analyst S.Y. Yang said U.S. election-related uncertainties are unlikely to materially affect the South Korean defense industry's performance or its export growth.
"Domestic firms have limited U.S. revenue exposure, while demand for stronger defense capabilities in Europe and the Middle East is expected to remain firm regardless of U.S. politics," Yang said in a note.
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
November 05, 2026 03:26 ET (08:26 GMT)
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