Hanwha Aerospace: Rights Offering of 3.6 Trillion Won (Negative on Entire Korean Defense Sector)

• Hanwha Aerospace (012450 KS) announced a rights offering capital raise of 3.6 trillion won (US$2.5 billion), which is the largest ever rights offering capital raise in Korea.

• We believe this capital raise is likely to result in higher concerns about shares dilution at Hanwha Aerospace and negatively impact its share price.

• It is also likely to have a significant negative impact on the entire Korean defense stocks, as it signals a top on this sector.