Shares of Cheryong Electric, a transformer manufacturing company, dropped more than 10% during trading on the 3rd. This appears to be influenced by the shock from DeepSeek, a Chinese artificial intelligence (AI) startup, as well as the tariff war initiated by U.S. President Donald Trump and the company's performance falling short of market expectations.
Cheryong Electric's stock traded at 49,100 won in the Korea Securities Dealers Automated Quotations (KOSDAQ) market at 2 p.m. that day, down 11.53% (6,400 won) from the previous trading day.
Cheryong Electric's stock decline intensified as the company reported fourth quarter results (October to December) that fell short of market expectations. Cheryong Electric disclosed that it recorded sales of 50.7 billion won and an operating profit of 12.6 billion won on a separate basis for the fourth quarter, which is roughly half of the 99.7 billion won in sales and 35.1 billion won in operating profit that the market had anticipated.
Cheryong Electric's stock also fell 9.02% (5,500 won) the previous trading day. As DeepSeek unveiled a cost-effective AI model, concerns emerged during the Lunar New Year holiday period that related infrastructure investments might not be as large as expected.
The signing of an executive order by President Trump on the 1st (local time) to impose tariffs on Canada, Mexico, and China also negatively impacted investor sentiment. If prices rise again, it could act as a burden on infrastructure investment.
Given the possibility of tariffs being imposed on South Korea by the Trump administration, uncertainties are expected to persist for the time being. However, some analysts suggest that the imposition of a 25% general tariff on Canadian products, while only applying a 10% tariff to energy products such as crude oil, could provide buying opportunities in sectors that benefit the U.S.
Lee Min-keun, a researcher at Korea Investment & Securities, noted that "tariff uncertainties will continue during the Trump administration's second term," while adding that sectors such as shipbuilding, defense, nuclear power, electricity, and biotechnology that could be seen as beneficiaries of Trump may present opportunities for increased investment in case of further declines.