Ankara: Defense and aerospace companies worldwide witnessed a significant surge in their stock performance, driven by increased defense spending, particularly in Europe, due to the ongoing conflict in Ukraine.
According to Anadolu Agency, the escalation in defense budgets by European nations has led to a rapid increase in the shares of defense and aerospace firms. This trend gained momentum following US President Donald Trump's inauguration, which prompted Europe to reassess its defense and security policies. Trump's divisive policies between the US and Europe in economic and defense matters were highlighted by his signing of over $3 trillion in investment and arms deals during his visits to Saudi Arabia, Qatar, and the United Arab Emirates in May.
A landmark $142 billion arms deal between the US and Saudi Arabia, considered the largest in history, also contributed to the robust stock performance of defense firms. Additionally, NATO leaders have agreed to elevate their defense spending to 5% of gross domestic product (GDP) by 2035, while reaffirming their commitment to Article 5, which ensures collective defense.
Earlier this year, Asian defense firms capitalized on rising tensions between India and Pakistan, resulting in strong stock performance. Between January and September, South Korea's Hanwha Aerospace provided a 239% return to investors, Germany's Rheinmetall returned 221.9%, Trkiye's Aselsan 196.6%, Sweden's Saab 145.8%, UK-based Rolls-Royce 109.3%, Italy's Leonardo 108.3%, and Britain's BAE Systems 79.3%.
Japan's Mitsubishi Heavy gained 74.5%, France-based Dassault Aviation 45.7%, with American firms L3Harris Technologies and RTX Corporation gaining 45.2% and 44.6%, respectively. French firm Safran's stocks increased by 43.4%, while US-based Northrop Grumman and General Dynamics surged by 29.8% and 29.4%, respectively. European aircraft maker Airbus gained 27.5%, Turkish Papilion Defense 26.2%, US-based Boeing 21.9%, German firm Lufthansa 16.3%, and American defense firm Lockheed Martin 2.7%.
Conversely, Trkiye's SDT Space and Defense firm saw its stocks fall by 3.1%, and Altinay Defense by 11.8%, while Onur Yuksek Teknoloji's stocks remained unchanged.
In terms of defense deals from January to September, Rheinmetall announced an acquisition agreement for the warship manufacturing division of the Bremen-based Lurssen Group and is planning to expand its capacity by establishing a new ammunition plant in Latvia. Italian Leonardo and Turkish Baykar firms formed 'LBA Systems' in Italy with a 50-50 partnership this year.
The US Defense Department revealed that the State Department approved the potential sale of military equipment and services to Ukraine worth $203.5 million, with British firm BAE Systems as the main contractor. Australia also announced awarding a $6.5 billion tender to Japanese Mitsubishi Heavy Industries to build new warships for its navy.
Lockheed Martin secured a $9.8 billion contract from the US Army to produce 1,970 Patriot missiles, marking the largest contract in the firm's history. Trkiye's Aselsan became the first company on Trkiye's BIST 100 index to surpass a market value of 1 trillion Turkish lira ($23.8 billion).
Global investor interest is shifting from traditional manufacturers to companies developing technologies that transform them into high value-added products. While high-growth firms are typically in the tech sector, a similar trend is emerging in defense. Defense technology developers have garnered more attention recently than traditional weapons manufacturers or companies offering conventional defense products, with Aselsan being a prime example of this shift. Trkiye's Aselsan is among the few companies worldwide that produce a variety of high-tech products, including AESA radar systems, electro-optical systems, electronic warfare systems, and systems powered by artificial intelligence (AI).