South Korea's successful test of its first domestically developed hypersonic glide vehicle on October 8 marks another milestone for a defense industry expanding its technological capabilities and international presence.
According to the Stockholm International Peace Research Institute (SIPRI), defense expenditure reached a record $2.89 trillion in 2025, with European spending increasing 14% and Asia-Pacific expenditure climbing 8.1%.
Interest in defense investment is also growing in the Gulf. Bloomberg reported that Abu Dhabi was considering a new investment vehicle targeting global defense manufacturers, while Abu Dhabi-based BlueFive Capital was planning a $3 billion aerospace and defense fund.
South Korean manufacturers already have established relationships in the UAE, positioning the country's defense sector within a growing network of international industrial partnerships.
For investors, the PLUS Korea Defense Industry Index ETF (KDEF), listed on NYSE Arca, offers targeted exposure to companies participating in this expansion. The fund is advised by Exchange Traded Concepts (ETC), a U.S.-based white-label ETF specialist that provides investment management and infrastructure services for exchange-traded funds.
South Korea Demonstrates Advanced Hypersonic Capabilities
President Lee Jae Myung personally observed the October 8 test, conducted under the country's Agency for Defense Development (ADD).
The vehicle successfully separated from its booster, demonstrated maneuverability at hypersonic speeds and struck its intended target. The test evaluated thermal protection, guidance systems and flight-control technologies required for advanced precision weapons.
The government has not publicly identified the companies responsible for developing the vehicle. However, two major Korean defense manufacturers with relevant technological expertise are Hanwha Aerospace and LIG Defense & Aerospace.
Hanwha Aerospace has established capabilities in propulsion, missile systems and advanced weapons platforms. LIG specializes in precision-guided missiles, radar and integrated defense electronics. Both companies are major participants in Korea's defense ecosystem, although neither has been confirmed as a contractor for the hypersonic program.
KDEF Offers Exposure to Korea’s Defense Industry
The PLUS Korea Defense Industry Index ETF tracks a portfolio of South Korean companies involved in defense manufacturing, aerospace and military technologies.
Its holdings span missile systems, armored vehicles, naval platforms and specialized industrial equipment.
Selected KDEF Holdings
Source: KDEF holdings, October 9, 2026. Weights are subject to change.
The fund's concentration in Korea's defense manufacturers distinguishes it from broader global aerospace and defense ETFs, whose portfolios often have greater exposure to American and European contractors.
Hanwha Companies Represents 26% of KDEF’s Portfolio
Three Hanwha Group companies collectively account for approximately 26% of KDEF, giving the conglomerate considerable influence over the fund's performance.
Hanwha Aerospace, KDEF's largest holding, manufactures the K9 self-propelled howitzer and Chunmoo multiple rocket launcher system. Its international order pipeline includes major contracts across Europe, supporting longer-term production visibility.
Hanwha Systems specializes in multifunction radar, communications infrastructure and advanced defense electronics. Its technologies support integrated air defense networks and next-generation military platforms.
Hanwha Ocean extends the group's capabilities into naval defense, manufacturing submarines and surface vessels alongside its commercial shipbuilding operations.
The companies provide exposure to different segments of defense modernization, positioning Hanwha across land systems, military electronics and naval capabilities.
UAE Partnerships Strengthen the Regional Investment Case
Hanwha's relationship with Abu Dhabi is already progressing beyond preliminary discussions.
In September, Hanwha and UAE defense group EDGE signed a term sheet to explore an integrated air defense network incorporating South Korea's L-SAM and M-SAM missile systems and Chunmoo rocket artillery.
The companies are also considering a joint venture, technology cooperation and localized manufacturing in the UAE, subject to further negotiations and approvals. The agreement builds on a November 2025 memorandum of understanding covering advanced defense technologies and potential industrial cooperation.
For GCC investors, these developments connect Korean defense manufacturers with regional procurement priorities and efforts to expand domestic defense production.
South Korea is also targeting $20 billion in defense exports during 2026, following approximately $15.4 billion in 2025.
KDEF offers a listed route into manufacturers positioned to participate in that growth, although its concentrated portfolio remains exposed to contract execution, valuations and changes in defense procurement budgets.
