Shares of South Korean construction firms are gaining momentum as expectations grow for Middle East reconstruction projects amid ceasefire negotiations between the United States and Iran. Major builders including Hyundai Engineering & Construction (000720.KS) rose more than 3%, while Samsung E&A (028050.KS) jumped nearly 7%. Samsung E&A's gains were amplified by expectations that Samsung Electronics (005930.KS), which posted more than 50 trillion won in operating profit in the first quarter, will increase plant facility orders.
As of 11:01 a.m. on May 7, Samsung E&A was trading at 48,750 won, up 6.79% from the previous session, according to the Korea Exchange (KRX). Hyundai Engineering & Construction gained 3.42%, and GS Engineering & Construction (006360.KS) rose 1.43%.
The rally in construction stocks is attributed to growing expectations for a ceasefire deal between the U.S. and Iran. Reports that the two sides have been maintaining behind-the-scenes contacts through mediators helped New York markets close higher overnight. Although the deadline for President Donald Trump's ultimatum — extended by one day to 8 p.m. on May 7 (9 a.m. May 8 Korea time) — is approaching, some momentum is building behind the view that both sides will opt for a ceasefire rather than escalation.
Samsung E&A's steep rise on the day was also driven by Samsung Electronics' strong earnings. Samsung Electronics disclosed that its preliminary first-quarter results showed revenue of 133 trillion won and operating profit of 57.2 trillion won. The company achieved record-high earnings in a single quarter, surpassing its entire full-year operating profit of 43.601 trillion won last year. As operating profit accumulates, the likelihood increases that Samsung Electronics will expand domestic and overseas plant orders to Samsung E&A. The semiconductor manufacturing business requires massive capital expenditure (CAPEX) to strengthen and maintain competitiveness.
"Korean construction firms have operated in the Middle East for an extended period, so they stand to benefit if ceasefire negotiations succeed," a securities industry official said. "However, since the outcome of the negotiations is difficult to predict, investors should consider mid- to long-term business outlook before making investment decisions."
