A "nuclear renaissance" is sweeping major countries. Nations that once pushed to phase out nuclear power over safety concerns are turning back to it to address surging electricity demand from the spread of artificial intelligence (AI) and energy security issues resurfacing amid geopolitical risks. The move to "return to nuclear" is especially clear in the United States and Europe.
The shift is directly affecting investment markets. A prime example is last month's disclosure that global asset manager Van Eck acquired more than 5% equity in KEPCO E&C, a nuclear power plant design corporations in Korea.
Van Eck, which managed $180 billion (about 265 trillion won) in asset as of last year, runs a nuclear-related ETF (Van Eck Uranium and Nuclear ETF). Since March last year, the ETF appears to have steadily increased the share of its holdings invested in KEPCO E&C.
In particular, KB Securities said Van Eck's investment "shows that the Western world's investment focus, which had been skewed toward nuclear operations (uranium), is shifting to 'new nuclear plant construction,' such as EPC (engineering, procurement and construction) and equipment."
While investment funds had concentrated on corporations related to uranium mining and nuclear plant operations (utilities), investors' interest has recently been moving to construction-related corporations such as EPC and equipment.
A Critical opportunity has come to Korea's nuclear industry. Korea is one of the few countries with competitiveness in nuclear plant construction, and a nuclear ecosystem has formed around EPC corporations.
Jang Moon-jun, a KB Securities researcher, said, "If Western investors begin to view nuclear power as a 'building industry' rather than an 'operating asset,' capital flows will change," adding, "Investors' interest will grow first in orders, construction and manufacturing, which show up in numbers before the operating revenue expected after a plant is completed."
Among large-cap nuclear-related stocks in the domestic stock market, parts and manufacturing companies include Doosan Enerbility, HD Hyundai Electric, Hyosung Heavy Industries, LS Electric, Woori Technology and Sanil Electric, while EPC contractors include Hyundai Engineering & Construction, Daewoo Engineering & Construction and DL E&C. KEPCO E&C is classified as an SMR design firm, and Korea Electric Power Corporation is classified as a utility.
KB Securities recommended investing in domestic ETFs that hold baskets of nuclear corporations. Western ETFs allocate 60% to 100% to uranium and utility corporations.
The ETF with a high allocation to EPC companies is Mirae Asset Global Investments' "TIGER Korea Nuclear Power," while Korea Investment Management's "ACE Nuclear TOP10" and NH-Amundi Asset Management's "HANARO Nuclear iSelect" ETFs have large allocations to parts and manufacturing companies.