As the Korea Meteorological Administration issues heat wave advisories day after day, investors on the domestic stock market are busy searching for "heat wave beneficiary stocks." After cooling appliance shares surged first, investor interest is rapidly spreading to air conditioner filters, power equipment and cosmetics. However, with share performances diverging by sector, analysts point out that investors need to examine earnings and the sustainability of the benefits rather than treating it as a simple seasonal theme.
According to the Korea Exchange on the 5th, from the 29th of last month, when the full-blown heat wave began, until this day, Paseco (037070.KQ) rose 23.1% and Winix (044340.KQ) gained 29.2%. Compared with the KOSPI's 16.5% rise and the KOSDAQ's 20.7% gain over the same period, this outpaced the market. The gains are interpreted as reflecting expectations that sales of cooling appliances such as air conditioners and fans will increase amid the record heat wave.
Expectations for expanded cooling appliance sales have also spread to air conditioner filter makers. Clean & Science (045520.KQ), an air conditioner filter manufacturer, rose 17.6% over the same period. The securities industry is paying attention to the fact that rising cooling appliance sales could lead to filter replacement demand. Because air conditioners have long replacement cycles while filters are consumables that must be replaced regularly, related demand can continue steadily, analysts said.
Market interest is also extending to power equipment stocks. Over the same period, LS Electric (010120.KS) rose 29.4%, HD Hyundai Electric (267260.KS) gained 31.7% and Iljin Electric climbed 25.6%. In the power equipment sector, "super cycle" expectations have already continued on the back of expanded artificial intelligence (AI) data center construction and rising demand to replace aging power grids, and the heat wave has acted as an additional driver of gains. Ham Hyung-do, a researcher at Shinhan Investment & Securities, said, "If expanding data center demand combines with rising power demand from the heat wave, it could result in a surge in power prices due to a power shortage." The Global Investment Analysis Office of Hana Securities' research center also recently analyzed that "expectations of increased consumption of cooling appliances such as air conditioners and fans, as well as ice cream and beverages, could act as momentum for related share prices."
However, heat wave beneficiary expectations have not extended to all sectors. Over the same period, APR rose 10.0% and Cosmax (192820.KS) gained 5.6%. Cosmetics stocks are also drawing expectations that the heat wave will boost demand for sunscreen and functional cosmetics, but their share price gains appear limited compared with cooling and power-related stocks.
Ice cream and liquor stocks, considered representative summer beneficiary stocks, showed even more muted share price reactions. Binggrae (005180.KS) rose just 0.6%, while Lotte Wellfood (280360.KS) fell 0.7% and HiteJinro (000080.KS) declined 1.9%.
As cases have repeatedly occurred where related stocks surged briefly on heat wave expectations before falling quickly amid weak earnings, analysts point out that investors should be cautious about chasing the heat wave theme. In fact, Paseco recorded a net loss of 2.8 billion won in the first quarter of this year, widening its deficit from a year earlier, while Winix reduced its net loss from 44.4 billion won in the first quarter of last year to 18.3 billion won this year but continued to post a deficit.
