Shipbuilding Stocks, Down by Half, Surge 8% in a Day... Is a Rebound Underway?

Shipbuilding Stocks Have Fallen Since the First Half
U.S. Warship Contract Boosts Investor Sentiment
"MASGA Gets Underway in Earnest, Easing De-Rating"
Data Center-Related Catalysts Add to Momentum

Shipbuilding stocks, which had been mired in a slump since the first half of the year, rose sharply on November 1. Although exchange rates, including a stronger won, have weighed on the export-oriented sector, analysts say the stocks could shed their undervaluation if the Korea-U.S. Shipbuilding Cooperation Project (MASGA) gathers momentum, starting with positive developments in the U.S. naval vessel business.

According to the Korea Exchange on November 3, Hanwha Ocean closed up 9.80% from the previous session, Samsung Heavy Industries rose 7.81%, and HD Korea Shipbuilding & Offshore Engineering gained 7.56%. Shipbuilding-themed ETFs also ranked among the top performers. According to ETF Check, SOL Shipbuilding Equipment rose 8.11% that day, ranking first among ETFs listed in Korea. KODEX Shipbuilding TOP 10 followed in second place, up 8.00%, while SOL Shipbuilding TOP 3 Plus rose 6.96% to rank seventh, and TIGER Shipbuilding TOP 10 gained 6.84% to rank eighth.

News that Hanwha had won a U.S. military vessel construction contract is believed to have sparked investor enthusiasm. Hanwha Defense USA said it had signed a $269 million contract (approximately 357.5 billion won) with TOTE Services, a U.S. Navy vessel construction manager (VCM), to build one medium landing ship (LSM). Hanwha Philly Shipyard will build the vessel. The deal is seen as opening up a new opportunity after South Korea suffered successive setbacks in special-purpose vessel exports this year, including Poland's ORKA program and Canada's submarine procurement program (CPSP).

Shipbuilding stocks surged in the first half of this year, but fell sharply from their peaks in the second half. Hanwha Ocean climbed to 154,800 won in March, then fell 61.5% by November 2. Samsung Heavy Industries dropped 51.6% from 35,350 won in May, while HD Korea Shipbuilding & Offshore Engineering fell 49.8% from its November 2025 level.

Jeong Eui-hyun, head of ETF Management at Mirae Asset Global Investments, said, "This is the first U.S. Navy vessel construction contract won since the acquisition of Philly Shipyard, and the first tangible result under the MASGA project. The lack of orders under MASGA had been a major factor behind the weakness in shipbuilding stocks, so this contract is significant because it addresses that issue. The contract includes an option to build three additional medium landing ships, fueling expectations that a full-fledged order rally is about to begin."

Attention is turning to whether favorable developments from the United States could mark the beginning of a revaluation of the shipbuilding sector. In August, U.S. President Donald Trump signed a memorandum allowing shipbuilders that invest in the United States to build the first two U.S. Navy vessels overseas, a move seen as opening up an opportunity. To qualify under the provision, companies must either secure at least a 50% stake and build a new shipyard in the United States, or acquire a shipyard there. HD Hyundai is pursuing the construction of a new shipyard in the United States through a joint venture with Kiewit. Hanwha acquired Philly Shipyard in Philadelphia in 2024 and announced an additional $5 billion investment last year.

Kim Dae-seong, an analyst at DS Investment & Securities, said, "The recent de-rating of the shipbuilding sector is expected to be partly reversed through joint construction of U.S. warships and merchant vessel orders once MASGA gets underway in earnest. If an overseas construction provision is included in the bicameral conference version of the U.S. National Defense Authorization Act (NDAA) for fiscal year 2027 in December, this could ease some concerns that the shipbuilding sector has peaked and provide ample scope for a broader re-rating of the sector."

In addition to the existing shipbuilding cycle, new drivers are emerging, including engines for data centers and floating data centers. Lee Dong-heon, an analyst at Shinhan Securities, said, "Engines generate high-margin earnings independent of the shipbuilding cycle. They form a second pillar supporting shipbuilding's valuation multiples and serve as a buffer during cyclical downturns."

This content was produced with the assistance of AI translation services.