South Korean Defense Stocks Fall 30-60% From Highs as Middle East Orders Stall in H1 2026

According to the Korea Exchange, on July 22, South Korea's five major defense contractors—Hanwha Aerospace, LIG Defense & Aerospace, Hyundai Rotem, Korea Aerospace Industries, and Hanwha Systems—posted an average year-to-date gain of 11.68% as of that date. However, this significantly lags the KOSPI's 56.58% advance over the same period, a shortfall of 44 percentage points.

Individual stocks have retreated sharply from March-April peaks: Hanwha Aerospace has fallen 47.52% from its high of 1.713 million won, LIG Defense 39.89% from 1.118 million won, and Hyundai Rotem 45.71% from 280,000 won. Analysts attribute the weakness to delayed new orders from the Middle East amid the ongoing conflict that began on February 28, combined with soft Q2 earnings. Securities firms expect a rebound in H2 2026 if order visibility improves, with Hanwha Aerospace positioned to benefit from European demand for K9 self-propelled guns and advanced air defense systems.