The KOSPI broke through the 6,400 mark to set a record high for a second consecutive session, despite uncertainty surrounding ceasefire negotiations between the United States and Iran. As large-cap semiconductor stocks that had led the bull run took a breather, other sectors including shipbuilding, defense and power equipment posted strong gains, producing a sector rotation.
The KOSPI closed at 6,417.93 on Wednesday, up 29.46 points, or 0.46%, from the previous session, according to the Korea Exchange. Foreign and institutional investors sold a net 751.5 billion won and 930.2 billion won worth of shares, respectively, while individual investors alone lifted the index by purchasing 1.79 trillion won worth.
Shipbuilding stocks led the advance as Samsung Electronics (005930.KS) (-0.68%) and SK hynix (000660.KS) (-0.08%), which had driven the market with steep gains, paused. HD Hyundai Heavy Industries (329180.KS) surged 11.28% on news that it had signed a large-scale icebreaker construction contract with the Swedish Maritime Administration, overtaking Kia (000270.KS) to become the ninth-largest company on the KOSPI by market capitalization (excluding preferred shares). HD Korea Shipbuilding & Offshore Engineering (009540.KS) jumped 8.30% on expectations of broad-based growth across affiliates including HD Hyundai Samho, while Samsung Heavy Industries (010140.KS) and Hanwha Ocean (042660.KS) climbed 5.30% and 2.90%, respectively.
Defense stocks also caught the updraft after a second round of U.S.-Iran ceasefire talks fell through. All four major Korean defense names ended higher: LIG Defense & Aerospace (079550.KS) (LIG D&A) rose 12.21%, Hyundai Rotem (064350.KS) gained 7.22%, Korea Aerospace Industries (047810.KS) added 1.81%, and Hanwha Aerospace (012450.KS) climbed 1.80%.
LIG D&A in particular joined the ranks of "emperor stocks" — shares trading above 1 million won — becoming the 10th such stock on the main bourse, boosted by order momentum after signing a supply contract worth more than 2.5% of its annual revenue. As of the end of last year, only four emperor stocks existed: Hyosung Heavy Industries (298040.KS), Korea Zinc, Samsung Biologics and Samyang Foods. This year alone, six additional stocks have joined the list, including Hanwha Aerospace, Doosan, SK hynix, Taekwang Industrial and HD Hyundai Electric (267260.KS).
"Supply shortages of Patriot interceptor missiles continue, and production increases are unlikely in the short term, so expectations for expanded exports of the Cheongung-II will persist," said Chae Un-saem, a researcher at Hana Securities. "We expect revenue recognition to expand, centered on the United Arab Emirates (UAE), leading earnings growth."
Power equipment stocks, which have seen successive forecasts of demand expansion, also joined the rotation. LS ELECTRIC (010120.KS), which disclosed record quarterly earnings on a consolidated basis for the first quarter of this year, surged more than 5%. Eleven brokerages raised their outlook on LS ELECTRIC, including LS Securities, which sharply lifted its price target to 260,000 won on the day. HD Hyundai Electric (3.02%) and Hyosung Heavy Industries (2.73%) also rose on expectations of growing demand for power infrastructure at global data centers.
Analysts said that while volatility may continue as geopolitical risks remain unresolved, sector rotation is likely to persist, centered on industries with earnings improvement expectations. "With full-year profit consensus for leading stocks including semiconductors being revised upward, it is right to maintain an overweight position," said Han Ji-young, a researcher at Kiwoom Securities. "But from a short-term tactical perspective, it is worth considering that opportunities for improved returns may also be available in other sectors."
