Hanwha Aerospace Leads Asian Defense Stock Rally as Geopolitical Risks Dominate Trading

Seoul, Tokyo, Shanghai — Defense contractors listed in Asia rose sharply on Friday, extending gains from earlier in the week as investors weighed fresh geopolitical flashpoints and reassessed regional security spending. South Korea’s Hanwha Aerospace jumped as much as 11 percent, the steepest advance among major names in the sector, while peers across South Korea and Japan also moved higher.

The surge in military-related shares followed news that a U.S. special-operations mission had captured Venezuelan President Nicolás Maduro and that President Donald Trump had revived efforts to purchase Greenland. The twin developments reinforced expectations that governments will boost defense budgets, prompting portfolio managers to seek exposure to arms manufacturers and suppliers.

In South Korea, ammunition maker Poongsan climbed more than 6 percent, and Korea Aerospace Industries rose 5 percent. Both companies benefit from domestic upgrade programs and export contracts, and traders said the latest geopolitical headlines added momentum to an already optimistic outlook. Turnover in all three stocks exceeded their 30-day averages within the first hour of trading on the Kospi.

Japanese defense names also advanced. Kawasaki Heavy Industries was up 2.29 percent and IHI gained 2.14 percent, extending year-to-date rallies that have outpaced the broader Japanese equity market. Brokers in Tokyo cited increased inquiries from overseas clients seeking hedge positions against potential regional conflict.

Despite the rally in defense-linked counters, broader Asian benchmarks posted mixed results. China’s CSI 300 inched 0.1 percent higher. The modest move came after the National Bureau of Statistics reported that December consumer prices increased 0.8 percent from a year earlier, matching the consensus in a Reuters survey. Producer prices fell 1.9 percent, slightly better than the anticipated 2 percent decline, offering tentative evidence that factory-gate deflation is easing.

Hong Kong’s Hang Seng Index was little changed, with local trading desks noting low volumes ahead of the weekend. Market participants said the city’s benchmark remained constrained by lingering concerns about global trade and the impact of higher U.S. borrowing costs on capital flows.

In Japan, the Nikkei 225 rose 1.24 percent and the broader Topix added 0.62 percent. Apparel group Fast Retailing, operator of the Uniqlo chain, jumped more than 7 percent after reporting a roughly one-third increase in quarterly operating profit and lifting its full-year outlook. The company credited resilient demand in China, North America and Europe, which helped offset U.S. import tariffs.

South Korea’s main Kospi index gained 0.67 percent. The small-cap Kosdaq finished flat as technology and biotech names lagged. A Seoul-based fund manager said the divergence between large-cap defense stocks and the rest of the market underscored investors’ preference for sectors viewed as insulated from cyclical headwinds.

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Australia’s S&P/ASX 200 slipped fractionally below the flatline. Mining heavyweight Rio Tinto dropped more than 5 percent after disclosing preliminary merger discussions with Glencore. A combination of the two would create a miner valued near US$207 billion, but analysts cautioned that antitrust reviews across multiple jurisdictions could prove challenging.

U.S. equity futures traded narrowly mixed during Asian hours as traders awaited the December non-farm payrolls report and a possible U.S. Supreme Court decision on the legality of Trump-era tariffs. A ruling could reshape trade strategy and budget projections by clarifying presidential authority over import duties.

Overnight on Wall Street, the Dow Jones Industrial Average added 270.03 points, or 0.55 percent, to close at 49,266.11. The Nasdaq Composite fell 0.44 percent to 23,480.02, weighed down by profit-taking in large-cap technology stocks. The S&P 500 edged up 0.01 percent to 6,921.46, with information technology the weakest of the index’s 11 sectors after dropping more than 1 percent.

While attention on Friday centered on headline defense names, strategists said the broader regional picture remained sensitive to interest-rate expectations, commodity moves and corporate earnings revisions. Many funds are maintaining elevated cash levels until the publication of U.S. labor data and clarity on tariff policy, events that could influence near-term direction for equities worldwide.

Crédito da imagem: Picture Alliance / Bernd von Jutrczenka