Here Are the Stocks to Watch After Two Koreas Agree to End War
(Bloomberg) -- If you’re trying to figure out how it’s all going to play out on the South Korean stock market on Monday after Kim Jong Un’s historic call for peace, don’t worry, we’ve got the list for you.
South Korea’s Kopi index climbed as much as 0.6 percent Monday after the North Korean leader and South Korean President Moon Jae-in agreed to finally end a seven-decade war this year, and pursue the “complete denuclearization” of the Korean Peninsula. On Sunday, Kim promised to close his main nuclear weapons test site in May.
Hyundai Rotem Company Ltd., a manufacturer of railroad equipment, jumped as much as 26 percent to the highest since 2014 after both Koreas agreed to look at ways to connect their rail and road networks. Builder Hyundai Engineering & Construction Co. rose as much as 19 percent -- the most in 14 years -- as investors bet on the possibility of future infrastructure projects between the two countries.
The benchmark equity index has been trading at a substantial valuation discount compared with its peers mainly due to concerns about political risk and corporate governance. And strategists and fund managers have said in the past that the Kospi index could surge if the political risk is removed.
Aside from the Kospi index in general, here are the stocks to watch:
Watch stocks of companies that may benefit from potential investments in North Korea: fertilizer maker Namhae Chemical Corp., rose 12 percent on Monday; Hyundai Elevator Co. gained 14 percent, and cement makers including Ssangyong Cement Industrial Co. and Hanil Cement Co. each climbed about 9 percent.
Shares of South Korean companies specializing in land-mine removal equipment surged last week as investors bet that the inter-Korean summit on Friday would reduce tensions along one of the most heavily fortified borders in the world.
Firstec Co., a developer of mine-clearing robots, rose as much as 11 percent today, and Welcron Co., a maker of clothes for mine-clearance operations, gained 19 percent.
With an agreement to end the war and Kim’s promise to denuclearize, there may not be a need to deploy the U.S.-built Terminal High Altitude Area Defense (Thaad) system. China, which saw this missile system as a threat, had enforced painful economic measures against South Korea like ordering travel agencies to stop selling tour packages to South Korea.
Consumer and tourism-related stocks that depend on revenues from Chinese tourists could see further bumps: AmorePacific Corp., LG Household & Health Care Ltd, Hotel Shilla Co., Hana Tour Service Inc. all registered gains today.
Korean airlines, including Asiana Airlines Inc., Korean Air Lines Co. and Jeju Air Co., also rose from expectations of an influx of visitors from China.
Most strategists are anticipating a short-term rally, at the very least. However, there’s one company you won’t be able to trade on: Samsung Electronics Co. The stock will be offline Monday through Thursday as Korea Exchange staff completes its 50-to-1 stock split.
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